Correlation Between MCB Bank and Bestway Cement
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Bestway Cement 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 MCB Bank and Bestway Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and Bestway Cement, you can compare the effects of market volatilities on MCB Bank and Bestway Cement 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 MCB Bank with a short position of Bestway Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Bestway Cement.
Diversification Opportunities for MCB Bank and Bestway Cement
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCB and Bestway is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Bestway Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bestway Cement and MCB 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 MCB Bank are associated (or correlated) with Bestway Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bestway Cement has no effect on the direction of MCB Bank i.e., MCB Bank and Bestway Cement go up and down completely randomly.
Pair Corralation between MCB Bank and Bestway Cement
Assuming the 90 days trading horizon MCB Bank is expected to generate 1.13 times more return on investment than Bestway Cement. However, MCB Bank is 1.13 times more volatile than Bestway Cement. It trades about 0.18 of its potential returns per unit of risk. Bestway Cement is currently generating about 0.17 per unit of risk. If you would invest 8,640 in MCB Bank on September 1, 2024 and sell it today you would earn a total of 18,486 from holding MCB Bank or generate 213.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.72% |
| Values | Daily Returns |
MCB Bank vs. Bestway Cement
Performance |
| Timeline |
| MCB Bank |
| Bestway Cement |
MCB Bank and Bestway Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Bestway Cement
The main advantage of trading using opposite MCB Bank and Bestway Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Bestway Cement 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 Bestway Cement will offset losses from the drop in Bestway Cement's long position.| MCB Bank vs. Oil and Gas | MCB Bank vs. Pakistan State Oil | MCB Bank vs. Pakistan Petroleum | MCB Bank vs. Fauji Fertilizer |
| Bestway Cement vs. National Bank of | Bestway Cement vs. Shaheen Insurance | Bestway Cement vs. Pakistan Telecommunication | Bestway Cement vs. Habib Insurance |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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