Correlation Between Bank of Punjab and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Bank of Punjab 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 Bank of Punjab and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Punjab and MCB Bank, you can compare the effects of market volatilities on Bank of Punjab 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 Bank of Punjab with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and MCB Bank.
Diversification Opportunities for Bank of Punjab and MCB Bank
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and MCB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Bank of Punjab 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 Bank of Punjab 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 Bank of Punjab i.e., Bank of Punjab and MCB Bank go up and down completely randomly.
Pair Corralation between Bank of Punjab and MCB Bank
Assuming the 90 days trading horizon Bank of Punjab is expected to under-perform the MCB Bank. In addition to that, Bank of Punjab is 2.19 times more volatile than MCB Bank. It trades about -0.19 of its total potential returns per unit of risk. MCB Bank is currently generating about -0.03 per unit of volatility. If you would invest 28,541 in MCB Bank on November 4, 2024 and sell it today you would lose (177.00) from holding MCB Bank or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Punjab vs. MCB Bank
Performance |
| Timeline |
| Bank of Punjab |
| MCB Bank |
Bank of Punjab and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Punjab and MCB Bank
The main advantage of trading using opposite Bank of Punjab and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab 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.| Bank of Punjab vs. Ghani Chemical Industries | Bank of Punjab vs. East West Insurance | Bank of Punjab vs. Shaheen Insurance | Bank of Punjab vs. First Fidelity Leasing |
| MCB Bank vs. East West Insurance | MCB Bank vs. Habib Insurance | MCB Bank vs. Pakistan Reinsurance | MCB Bank vs. Century 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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