Correlation Between MCS Steel and Lease IT

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

Diversification Opportunities for MCS Steel and Lease IT

0.62

Correlation Coefficient

MCS Steel  Lease IT

Poor diversification

The 3 months correlation between MCS and Lease is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and Lease IT Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lease IT 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 Lease IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lease IT Public has no effect on the direction of MCS Steel i.e., MCS Steel and Lease IT go up and down completely randomly.

Pair Corralation between MCS Steel and Lease IT

Assuming the 90 days trading horizon MCS Steel Public is expected to generate 0.39 times more return on investment than Lease IT. However, MCS Steel Public is 2.55 times less risky than Lease IT. It trades about -0.09 of its potential returns per unit of risk. Lease IT Public is currently generating about -0.17 per unit of risk. If you would invest  740.00  in MCS Steel Public on September 13, 2024 and sell it today you would lose (50.00) from holding MCS Steel Public or give up 6.76% 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.  Lease IT 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.

Lease IT Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lease IT 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 basic indicators 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 Lease IT

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

The idea behind MCS Steel Public and Lease IT 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.