Correlation Between MCS Steel and Kingsmen CMTI

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

Diversification Opportunities for MCS Steel and Kingsmen CMTI

0.64

Correlation Coefficient

MCS Steel  Kingsmen CMTI

Poor diversification

The 3 months correlation between MCS and Kingsmen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and Kingsmen CMTI Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsmen CMTI 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 Kingsmen CMTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsmen CMTI Public has no effect on the direction of MCS Steel i.e., MCS Steel and Kingsmen CMTI go up and down completely randomly.

Pair Corralation between MCS Steel and Kingsmen CMTI

Assuming the 90 days trading horizon MCS Steel is expected to generate 1.05 times less return on investment than Kingsmen CMTI. But when comparing it to its historical volatility, MCS Steel Public is 1.0 times less risky than Kingsmen CMTI. It trades about 0.05 of its potential returns per unit of risk. Kingsmen CMTI Public is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  81.00  in Kingsmen CMTI Public on September 13, 2024 and sell it today you would earn a total of  36.00  from holding Kingsmen CMTI Public or generate 44.44% return on investment over 90 days.

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

MCS Steel Public  vs.  Kingsmen CMTI 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 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.

Kingsmen CMTI Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingsmen CMTI Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers 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 Kingsmen CMTI

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

The idea behind MCS Steel Public and Kingsmen CMTI 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.