Correlation Between MCS Steel and Thai Reinsurance

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

Diversification Opportunities for MCS Steel and Thai Reinsurance

0.77

Correlation Coefficient

MCS Steel  Thai Reinsurance

Poor diversification

The 3 months correlation between MCS and Thai is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and Thai Reinsurance Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Reinsurance Public 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 Thai Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Reinsurance Public has no effect on the direction of MCS Steel i.e., MCS Steel and Thai Reinsurance go up and down completely randomly.

Pair Corralation between MCS Steel and Thai Reinsurance

Assuming the 90 days trading horizon MCS Steel Public is expected to generate 0.6 times more return on investment than Thai Reinsurance. However, MCS Steel Public is 1.67 times less risky than Thai Reinsurance. It trades about -0.07 of its potential returns per unit of risk. Thai Reinsurance Public is currently generating about -0.11 per unit of risk. If you would invest  740.00  in MCS Steel Public on September 16, 2024 and sell it today you would lose (40.00) from holding MCS Steel Public or give up 5.41% 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.  Thai Reinsurance Public

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 quite persistent basic indicators, MCS Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Thai Reinsurance Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Reinsurance Public 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 forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with MCS Steel and Thai Reinsurance

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

The idea behind MCS Steel Public and Thai Reinsurance Public 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.