Correlation Between MCS Steel and Siam Cement

Can any of the company-specific risk be diversified away by investing in both MCS Steel and Siam Cement at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MCS Steel and Siam Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MCS Steel Public and The Siam Cement, you can compare the effects of market volatilities on MCS Steel and Siam Cement and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MCS Steel with a short position of Siam Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCS Steel and Siam Cement.

Diversification Opportunities for MCS Steel and Siam Cement

0.61

Correlation Coefficient

MCS Steel  Siam Cement

Poor diversification

The 3 months correlation between MCS and Siam is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and The Siam Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Cement and MCS Steel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MCS Steel Public are associated (or correlated) with Siam Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Cement has no effect on the direction of MCS Steel i.e., MCS Steel and Siam Cement go up and down completely randomly.

Pair Corralation between MCS Steel and Siam Cement

Assuming the 90 days trading horizon MCS Steel Public is expected to generate 0.18 times more return on investment than Siam Cement. However, MCS Steel Public is 5.44 times less risky than Siam Cement. It trades about -0.15 of its potential returns per unit of risk. The Siam Cement is currently generating about -0.21 per unit of risk. If you would invest  710.00  in MCS Steel Public on October 7, 2024 and sell it today you would lose (50.00) from holding MCS Steel Public or give up 7.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

MCS Steel Public  vs.  The Siam Cement

MCS Steel Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCS Steel Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Siam Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Siam Cement has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MCS Steel and Siam Cement

The main advantage of trading using opposite MCS Steel and Siam Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCS Steel position performs unexpectedly, Siam Cement can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Siam Cement will offset losses from the drop in Siam Cement's long position.

The idea behind MCS Steel Public and The Siam Cement pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.