Correlation Between MCS Steel and SET100 Index

Can any of the company-specific risk be diversified away by investing in both MCS Steel and SET100 Index 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 SET100 Index 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 SET100 Index, you can compare the effects of market volatilities on MCS Steel and SET100 Index 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 SET100 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCS Steel and SET100 Index.

Diversification Opportunities for MCS Steel and SET100 Index

-0.7

Correlation Coefficient

MCS Steel  SET100 Index

Excellent diversification

The 3 months correlation between MCS and SET100 is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and SET100 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SET100 Index 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 SET100 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SET100 Index has no effect on the direction of MCS Steel i.e., MCS Steel and SET100 Index go up and down completely randomly.

Pair Corralation between MCS Steel and SET100 Index

Assuming the 90 days trading horizon MCS Steel Public is expected to generate 1.46 times more return on investment than SET100 Index. However, MCS Steel is 1.46 times more volatile than SET100 Index. It trades about 0.12 of its potential returns per unit of risk. SET100 Index is currently generating about -0.23 per unit of risk. If you would invest  650.00  in MCS Steel Public on December 22, 2024 and sell it today you would earn a total of  80.00  from holding MCS Steel Public or generate 12.31% return on investment over 90 days.

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

MCS Steel Public  vs.  SET100 Index

Pair Trading with MCS Steel and SET100 Index

The main advantage of trading using opposite MCS Steel and SET100 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCS Steel position performs unexpectedly, SET100 Index 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 SET100 Index will offset losses from the drop in SET100 Index's long position.

The idea behind MCS Steel Public and SET100 Index 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.