Correlation Between MCB Bank and Honda Atlas
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Honda Atlas 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 Honda Atlas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and Honda Atlas Cars, you can compare the effects of market volatilities on MCB Bank and Honda Atlas 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 Honda Atlas. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Honda Atlas.
Diversification Opportunities for MCB Bank and Honda Atlas
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MCB and Honda is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Honda Atlas Cars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Atlas Cars 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 Honda Atlas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honda Atlas Cars has no effect on the direction of MCB Bank i.e., MCB Bank and Honda Atlas go up and down completely randomly.
Pair Corralation between MCB Bank and Honda Atlas
Assuming the 90 days trading horizon MCB Bank is expected to generate 1.37 times less return on investment than Honda Atlas. But when comparing it to its historical volatility, MCB Bank is 1.55 times less risky than Honda Atlas. It trades about 0.11 of its potential returns per unit of risk. Honda Atlas Cars is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 24,812 in Honda Atlas Cars on August 31, 2024 and sell it today you would earn a total of 1,633 from holding Honda Atlas Cars or generate 6.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MCB Bank vs. Honda Atlas Cars
Performance |
| Timeline |
| MCB Bank |
| Honda Atlas Cars |
MCB Bank and Honda Atlas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Honda Atlas
The main advantage of trading using opposite MCB Bank and Honda Atlas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Honda Atlas 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 Honda Atlas will offset losses from the drop in Honda Atlas' long position.| MCB Bank vs. Oil and Gas | MCB Bank vs. Pakistan State Oil | MCB Bank vs. Pakistan Petroleum | MCB Bank vs. Fauji Fertilizer |
| Honda Atlas vs. Pakistan Telecommunication | Honda Atlas vs. Faysal Bank | Honda Atlas vs. Air Link Communication | Honda Atlas vs. United 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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