Correlation Between Ford and Meezan Bank
Can any of the company-specific risk be diversified away by investing in both Ford and Meezan 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 Ford and Meezan Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Meezan Bank, you can compare the effects of market volatilities on Ford and Meezan 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 Ford with a short position of Meezan Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Meezan Bank.
Diversification Opportunities for Ford and Meezan Bank
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Meezan is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Meezan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meezan Bank and Ford 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 Ford Motor are associated (or correlated) with Meezan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meezan Bank has no effect on the direction of Ford i.e., Ford and Meezan Bank go up and down completely randomly.
Pair Corralation between Ford and Meezan Bank
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Meezan Bank. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.17 times less risky than Meezan Bank. The stock trades about 0.0 of its potential returns per unit of risk. The Meezan Bank is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 24,001 in Meezan Bank on August 28, 2024 and sell it today you would lose (300.00) from holding Meezan Bank or give up 1.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Meezan Bank
Performance |
| Timeline |
| Ford Motor |
| Meezan Bank |
Ford and Meezan Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Meezan Bank
The main advantage of trading using opposite Ford and Meezan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Meezan 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 Meezan Bank will offset losses from the drop in Meezan Bank's long position.The idea behind Ford Motor and Meezan Bank 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.| Meezan Bank vs. Pakistan Aluminium Beverage | Meezan Bank vs. TPL Insurance | Meezan Bank vs. Roshan Packages | Meezan Bank vs. Reliance Insurance Co |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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