Correlation Between DCB MERCIAL and NATIONAL MICROFINANCE
Can any of the company-specific risk be diversified away by investing in both DCB MERCIAL and NATIONAL MICROFINANCE 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 DCB MERCIAL and NATIONAL MICROFINANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DCB MERCIAL BANK and NATIONAL MICROFINANCE BANK, you can compare the effects of market volatilities on DCB MERCIAL and NATIONAL MICROFINANCE 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 DCB MERCIAL with a short position of NATIONAL MICROFINANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of DCB MERCIAL and NATIONAL MICROFINANCE.
Diversification Opportunities for DCB MERCIAL and NATIONAL MICROFINANCE
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between DCB and NATIONAL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding DCB MERCIAL BANK and NATIONAL MICROFINANCE BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL MICROFINANCE and DCB MERCIAL 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 DCB MERCIAL BANK are associated (or correlated) with NATIONAL MICROFINANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL MICROFINANCE has no effect on the direction of DCB MERCIAL i.e., DCB MERCIAL and NATIONAL MICROFINANCE go up and down completely randomly.
Pair Corralation between DCB MERCIAL and NATIONAL MICROFINANCE
Assuming the 90 days trading horizon DCB MERCIAL BANK is expected to under-perform the NATIONAL MICROFINANCE. In addition to that, DCB MERCIAL is 2.56 times more volatile than NATIONAL MICROFINANCE BANK. It trades about -0.18 of its total potential returns per unit of risk. NATIONAL MICROFINANCE BANK is currently generating about 0.09 per unit of volatility. If you would invest 540,000 in NATIONAL MICROFINANCE BANK on October 26, 2024 and sell it today you would earn a total of 20,000 from holding NATIONAL MICROFINANCE BANK or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DCB MERCIAL BANK vs. NATIONAL MICROFINANCE BANK
Performance |
| Timeline |
| DCB MERCIAL BANK |
| NATIONAL MICROFINANCE |
DCB MERCIAL and NATIONAL MICROFINANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DCB MERCIAL and NATIONAL MICROFINANCE
The main advantage of trading using opposite DCB MERCIAL and NATIONAL MICROFINANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DCB MERCIAL position performs unexpectedly, NATIONAL MICROFINANCE 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 NATIONAL MICROFINANCE will offset losses from the drop in NATIONAL MICROFINANCE's long position.| DCB MERCIAL vs. YETU MICROFINANCE PLC | DCB MERCIAL vs. MUCOBA BANK PLC | DCB MERCIAL vs. TANZANIA PORTLAND CEMENT | DCB MERCIAL vs. TOL GASES LTD |
| NATIONAL MICROFINANCE vs. YETU MICROFINANCE PLC | NATIONAL MICROFINANCE vs. MUCOBA BANK PLC | NATIONAL MICROFINANCE vs. TANZANIA PORTLAND CEMENT | NATIONAL MICROFINANCE vs. TOL GASES LTD |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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