Correlation Between Jubilee Life and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Jubilee Life 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 Jubilee Life and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jubilee Life Insurance and MCB Bank, you can compare the effects of market volatilities on Jubilee Life 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 Jubilee Life with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jubilee Life and MCB Bank.
Diversification Opportunities for Jubilee Life and MCB Bank
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jubilee and MCB is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Jubilee Life Insurance and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Jubilee Life 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 Jubilee Life Insurance 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 Jubilee Life i.e., Jubilee Life and MCB Bank go up and down completely randomly.
Pair Corralation between Jubilee Life and MCB Bank
Assuming the 90 days trading horizon Jubilee Life is expected to generate 1.68 times less return on investment than MCB Bank. But when comparing it to its historical volatility, Jubilee Life Insurance is 1.01 times less risky than MCB Bank. It trades about 0.09 of its potential returns per unit of risk. MCB Bank is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 19,136 in MCB Bank on August 30, 2024 and sell it today you would earn a total of 7,645 from holding MCB Bank or generate 39.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.18% |
| Values | Daily Returns |
Jubilee Life Insurance vs. MCB Bank
Performance |
| Timeline |
| Jubilee Life Insurance |
| MCB Bank |
Jubilee Life and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jubilee Life and MCB Bank
The main advantage of trading using opposite Jubilee Life and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jubilee Life 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.| Jubilee Life vs. Escorts Investment Bank | Jubilee Life vs. United Insurance | Jubilee Life vs. Silkbank | Jubilee Life vs. Askari Bank |
| MCB Bank vs. Masood Textile Mills | MCB Bank vs. Fauji Foods | MCB Bank vs. KSB Pumps | MCB Bank vs. Mari Petroleum |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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