Correlation Between Lucky Cement and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Lucky Cement 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 Lucky Cement and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucky Cement and MCB Bank, you can compare the effects of market volatilities on Lucky Cement 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 Lucky Cement with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucky Cement and MCB Bank.
Diversification Opportunities for Lucky Cement and MCB Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lucky and MCB is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lucky Cement and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Lucky Cement 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 Lucky Cement 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 Lucky Cement i.e., Lucky Cement and MCB Bank go up and down completely randomly.
Pair Corralation between Lucky Cement and MCB Bank
Assuming the 90 days trading horizon Lucky Cement is expected to generate 2.27 times less return on investment than MCB Bank. But when comparing it to its historical volatility, Lucky Cement is 1.15 times less risky than MCB Bank. It trades about 0.07 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 | 100.0% |
| Values | Daily Returns |
Lucky Cement vs. MCB Bank
Performance |
| Timeline |
| Lucky Cement |
| MCB Bank |
Lucky Cement and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucky Cement and MCB Bank
The main advantage of trading using opposite Lucky Cement and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucky Cement 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.| Lucky Cement vs. AKD Hospitality | Lucky Cement vs. Century Insurance | Lucky Cement vs. East West Insurance | Lucky Cement vs. Oil and Gas |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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