Correlation Between MCS Steel and Chow Steel

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

Diversification Opportunities for MCS Steel and Chow Steel

-0.1

Correlation Coefficient

MCS Steel  Chow Steel

Good diversification

The 3 months correlation between MCS and Chow is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and Chow Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chow Steel Industries 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 Chow Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chow Steel Industries has no effect on the direction of MCS Steel i.e., MCS Steel and Chow Steel go up and down completely randomly.

Pair Corralation between MCS Steel and Chow Steel

Assuming the 90 days trading horizon MCS Steel is expected to generate 3.86 times less return on investment than Chow Steel. But when comparing it to its historical volatility, MCS Steel Public is 4.61 times less risky than Chow Steel. It trades about 0.11 of its potential returns per unit of risk. Chow Steel Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  126.00  in Chow Steel Industries on April 23, 2025 and sell it today you would earn a total of  38.00  from holding Chow Steel Industries or generate 30.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

MCS Steel Public  vs.  Chow Steel Industries

MCS Steel Public

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MCS Steel Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, MCS Steel may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Chow Steel Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chow Steel Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Chow Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MCS Steel and Chow Steel

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

The idea behind MCS Steel Public and Chow Steel Industries 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.