Correlation Between MCB Bank and ORIX Leasing
Can any of the company-specific risk be diversified away by investing in both MCB Bank and ORIX Leasing 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 ORIX Leasing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and ORIX Leasing Pakistan, you can compare the effects of market volatilities on MCB Bank and ORIX Leasing 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 ORIX Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and ORIX Leasing.
Diversification Opportunities for MCB Bank and ORIX Leasing
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MCB and ORIX is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and ORIX Leasing Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX Leasing Pakistan 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 ORIX Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX Leasing Pakistan has no effect on the direction of MCB Bank i.e., MCB Bank and ORIX Leasing go up and down completely randomly.
Pair Corralation between MCB Bank and ORIX Leasing
Assuming the 90 days trading horizon MCB Bank is expected to generate 1.06 times more return on investment than ORIX Leasing. However, MCB Bank is 1.06 times more volatile than ORIX Leasing Pakistan. It trades about 0.14 of its potential returns per unit of risk. ORIX Leasing Pakistan is currently generating about -0.01 per unit of risk. If you would invest 25,149 in MCB Bank on August 29, 2024 and sell it today you would earn a total of 1,527 from holding MCB Bank or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
MCB Bank vs. ORIX Leasing Pakistan
Performance |
| Timeline |
| MCB Bank |
| ORIX Leasing Pakistan |
MCB Bank and ORIX Leasing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and ORIX Leasing
The main advantage of trading using opposite MCB Bank and ORIX Leasing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, ORIX Leasing 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 ORIX Leasing will offset losses from the drop in ORIX Leasing's long position.| MCB Bank vs. AKD Hospitality | MCB Bank vs. Air Link Communication | MCB Bank vs. Roshan Packages | MCB Bank vs. Data Agro |
| ORIX Leasing vs. Masood Textile Mills | ORIX Leasing vs. Fauji Foods | ORIX Leasing vs. KSB Pumps | ORIX Leasing 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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