Correlation Between MCB Bank and 1 Year

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Can any of the company-specific risk be diversified away by investing in both MCB Bank and 1 Year 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 1 Year into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and 1 Year GIS, you can compare the effects of market volatilities on MCB Bank and 1 Year 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 1 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and 1 Year.

Diversification Opportunities for MCB Bank and 1 Year

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between MCB and P01GIS090525 is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and 1 Year GIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1 Year GIS 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 1 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1 Year GIS has no effect on the direction of MCB Bank i.e., MCB Bank and 1 Year go up and down completely randomly.

Pair Corralation between MCB Bank and 1 Year

Assuming the 90 days trading horizon MCB Bank is expected to generate 10.72 times more return on investment than 1 Year. However, MCB Bank is 10.72 times more volatile than 1 Year GIS. It trades about 0.16 of its potential returns per unit of risk. 1 Year GIS is currently generating about 0.57 per unit of risk. If you would invest  18,875  in MCB Bank on September 3, 2024 and sell it today you would earn a total of  8,251  from holding MCB Bank or generate 43.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy91.8%
ValuesDaily Returns

MCB Bank  vs.  1 Year GIS

 Performance 
       Timeline  
MCB Bank 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in MCB Bank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MCB Bank reported solid returns over the last few months and may actually be approaching a breakup point.
1 Year GIS 

Risk-Adjusted Performance

34 of 100

 
Weak
 
Strong
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in 1 Year GIS are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 1 Year is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MCB Bank and 1 Year Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MCB Bank and 1 Year

The main advantage of trading using opposite MCB Bank and 1 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, 1 Year 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 1 Year will offset losses from the drop in 1 Year's long position.
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The idea behind MCB Bank and 1 Year GIS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 CEOs Directory module to screen CEOs from public companies around the world.

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