Correlation Between MCS Steel and KGI Securities

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

Diversification Opportunities for MCS Steel and KGI Securities

0.71

Correlation Coefficient

MCS Steel  KGI Securities

Poor diversification

The 3 months correlation between MCS and KGI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and KGI Securities Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGI Securities 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 KGI Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGI Securities Public has no effect on the direction of MCS Steel i.e., MCS Steel and KGI Securities go up and down completely randomly.

Pair Corralation between MCS Steel and KGI Securities

Assuming the 90 days trading horizon MCS Steel Public is expected to under-perform the KGI Securities. In addition to that, MCS Steel is 1.84 times more volatile than KGI Securities Public. It trades about -0.28 of its total potential returns per unit of risk. KGI Securities Public is currently generating about -0.22 per unit of volatility. If you would invest  432.00  in KGI Securities Public on September 15, 2024 and sell it today you would lose (10.00) from holding KGI Securities Public or give up 2.31% 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.  KGI Securities 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.

KGI Securities Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KGI Securities Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward 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 KGI Securities

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

The idea behind MCS Steel Public and KGI Securities 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.