Correlation Between MCS Steel and Globlex Holding

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

Diversification Opportunities for MCS Steel and Globlex Holding

0.67

Correlation Coefficient

MCS Steel  Globlex Holding

Poor diversification

The 3 months correlation between MCS and Globlex is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and Globlex Holding Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globlex Holding Mana 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 Globlex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globlex Holding Mana has no effect on the direction of MCS Steel i.e., MCS Steel and Globlex Holding go up and down completely randomly.

Pair Corralation between MCS Steel and Globlex Holding

Assuming the 90 days trading horizon MCS Steel Public is expected to generate 0.77 times more return on investment than Globlex Holding. However, MCS Steel Public is 1.3 times less risky than Globlex Holding. It trades about -0.07 of its potential returns per unit of risk. Globlex Holding Management is currently generating about -0.09 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.  Globlex Holding Management

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.

Globlex Holding Mana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globlex Holding Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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.

Pair Trading with MCS Steel and Globlex Holding

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

The idea behind MCS Steel Public and Globlex Holding Management 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.