Correlation Between MCB Bank and MCB Investment
Can any of the company-specific risk be diversified away by investing in both MCB Bank and MCB Investment 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 MCB Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and MCB Investment Manag, you can compare the effects of market volatilities on MCB Bank and MCB Investment 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 MCB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and MCB Investment.
Diversification Opportunities for MCB Bank and MCB Investment
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCB and MCB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and MCB Investment Manag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Investment Manag 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 MCB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Investment Manag has no effect on the direction of MCB Bank i.e., MCB Bank and MCB Investment go up and down completely randomly.
Pair Corralation between MCB Bank and MCB Investment
Assuming the 90 days trading horizon MCB Bank is expected to generate 1.97 times less return on investment than MCB Investment. But when comparing it to its historical volatility, MCB Bank is 1.4 times less risky than MCB Investment. It trades about 0.14 of its potential returns per unit of risk. MCB Investment Manag is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,468 in MCB Investment Manag on September 4, 2024 and sell it today you would earn a total of 4,391 from holding MCB Investment Manag or generate 177.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.67% |
| Values | Daily Returns |
MCB Bank vs. MCB Investment Manag
Performance |
| Timeline |
| MCB Bank |
| MCB Investment Manag |
MCB Bank and MCB Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and MCB Investment
The main advantage of trading using opposite MCB Bank and MCB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, MCB Investment 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 Investment will offset losses from the drop in MCB Investment's long position.| MCB Bank vs. Masood Textile Mills | MCB Bank vs. Fauji Foods | MCB Bank vs. KSB Pumps | MCB Bank vs. Mari Petroleum |
| MCB Investment vs. Habib Insurance | MCB Investment vs. Pakistan Refinery | MCB Investment vs. Century Insurance | MCB Investment vs. Reliance Weaving Mills |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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