Correlation Between MCB Bank and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Faysal 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 MCB Bank and Faysal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and Faysal Bank, you can compare the effects of market volatilities on MCB Bank and Faysal 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 MCB Bank with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Faysal Bank.
Diversification Opportunities for MCB Bank and Faysal Bank
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCB and Faysal is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of MCB Bank i.e., MCB Bank and Faysal Bank go up and down completely randomly.
Pair Corralation between MCB Bank and Faysal Bank
Assuming the 90 days trading horizon MCB Bank is expected to generate 1.0 times less return on investment than Faysal Bank. But when comparing it to its historical volatility, MCB Bank is 1.47 times less risky than Faysal Bank. It trades about 0.17 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,800 in Faysal Bank on August 29, 2024 and sell it today you would earn a total of 1,929 from holding Faysal Bank or generate 68.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MCB Bank vs. Faysal Bank
Performance |
| Timeline |
| MCB Bank |
| Faysal Bank |
MCB Bank and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Faysal Bank
The main advantage of trading using opposite MCB Bank and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Faysal 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| MCB Bank vs. AKD Hospitality | MCB Bank vs. Air Link Communication | MCB Bank vs. Roshan Packages | MCB Bank vs. Data Agro |
| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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