Correlation Between Faysal Bank and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Faysal Bank 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 Faysal Bank and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faysal Bank and MCB Bank, you can compare the effects of market volatilities on Faysal Bank 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 Faysal Bank with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faysal Bank and MCB Bank.
Diversification Opportunities for Faysal Bank and MCB Bank
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Faysal and MCB is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Faysal Bank and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Faysal Bank 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 Faysal Bank 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 Faysal Bank i.e., Faysal Bank and MCB Bank go up and down completely randomly.
Pair Corralation between Faysal Bank and MCB Bank
Assuming the 90 days trading horizon Faysal Bank is expected to generate 1.06 times less return on investment than MCB Bank. In addition to that, Faysal Bank is 1.39 times more volatile than MCB Bank. It trades about 0.1 of its total potential returns per unit of risk. MCB Bank is currently generating about 0.15 per unit of volatility. If you would invest 14,954 in MCB Bank on September 2, 2024 and sell it today you would earn a total of 12,172 from holding MCB Bank or generate 81.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faysal Bank vs. MCB Bank
Performance |
| Timeline |
| Faysal Bank |
| MCB Bank |
Faysal Bank and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faysal Bank and MCB Bank
The main advantage of trading using opposite Faysal Bank and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faysal Bank 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.| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal Bank vs. Mari Petroleum |
| MCB Bank vs. Oil and Gas | MCB Bank vs. Pakistan State Oil | MCB Bank vs. Pakistan Petroleum | MCB Bank vs. Fauji Fertilizer |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |