Correlation Between AKD Hospitality and MCB Bank
Can any of the company-specific risk be diversified away by investing in both AKD Hospitality and MCB Bank 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 AKD Hospitality and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AKD Hospitality and MCB Bank, you can compare the effects of market volatilities on AKD Hospitality and MCB Bank 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 AKD Hospitality with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKD Hospitality and MCB Bank.
Diversification Opportunities for AKD Hospitality and MCB Bank
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AKD and MCB is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AKD Hospitality and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and AKD Hospitality 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 AKD Hospitality are associated (or correlated) with MCB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Bank has no effect on the direction of AKD Hospitality i.e., AKD Hospitality and MCB Bank go up and down completely randomly.
Pair Corralation between AKD Hospitality and MCB Bank
Assuming the 90 days trading horizon AKD Hospitality is expected to generate 3.75 times more return on investment than MCB Bank. However, AKD Hospitality is 3.75 times more volatile than MCB Bank. It trades about 0.08 of its potential returns per unit of risk. MCB Bank is currently generating about -0.09 per unit of risk. If you would invest 15,199 in AKD Hospitality on October 30, 2024 and sell it today you would earn a total of 717.00 from holding AKD Hospitality or generate 4.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AKD Hospitality vs. MCB Bank
Performance |
| Timeline |
| AKD Hospitality |
| MCB Bank |
AKD Hospitality and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AKD Hospitality and MCB Bank
The main advantage of trading using opposite AKD Hospitality and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKD Hospitality position performs unexpectedly, MCB Bank 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 MCB Bank will offset losses from the drop in MCB Bank's long position.| AKD Hospitality vs. Ghandhara Automobile | AKD Hospitality vs. Apna Microfinance Bank | AKD Hospitality vs. Oil and Gas | AKD Hospitality vs. Jubilee Life Insurance |
| MCB Bank vs. Fateh Sports Wear | MCB Bank vs. Pakistan Reinsurance | MCB Bank vs. Universal Insurance | MCB Bank vs. Askari General Insurance |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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