Correlation Between Capital Engineering and MCS Steel

Can any of the company-specific risk be diversified away by investing in both Capital Engineering and MCS Steel 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 Capital Engineering and MCS Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital Engineering Network and MCS Steel Public, you can compare the effects of market volatilities on Capital Engineering and MCS Steel 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 Capital Engineering with a short position of MCS Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Engineering and MCS Steel.

Diversification Opportunities for Capital Engineering and MCS Steel

0.3

Correlation Coefficient

Capital Engineering  MCS Steel

Weak diversification

The 3 months correlation between Capital and MCS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Capital Engineering Network and MCS Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCS Steel Public and Capital Engineering 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 Capital Engineering Network are associated (or correlated) with MCS Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCS Steel Public has no effect on the direction of Capital Engineering i.e., Capital Engineering and MCS Steel go up and down completely randomly.

Pair Corralation between Capital Engineering and MCS Steel

Assuming the 90 days trading horizon Capital Engineering Network is expected to generate 0.58 times more return on investment than MCS Steel. However, Capital Engineering Network is 1.72 times less risky than MCS Steel. It trades about -0.11 of its potential returns per unit of risk. MCS Steel Public is currently generating about -0.07 per unit of risk. If you would invest  210.00  in Capital Engineering Network on September 13, 2024 and sell it today you would lose (10.00) from holding Capital Engineering Network or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Capital Engineering Network  vs.  MCS Steel Public

Capital Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Engineering Network has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Capital Engineering is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Capital Engineering and MCS Steel

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

The idea behind Capital Engineering Network and MCS Steel 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.