Correlation Between MCB Bank and Pace Pakistan
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Pace Pakistan 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 Pace Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and Pace Pakistan, you can compare the effects of market volatilities on MCB Bank and Pace Pakistan 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 Pace Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Pace Pakistan.
Diversification Opportunities for MCB Bank and Pace Pakistan
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MCB and Pace is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Pace Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace 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 Pace Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Pakistan has no effect on the direction of MCB Bank i.e., MCB Bank and Pace Pakistan go up and down completely randomly.
Pair Corralation between MCB Bank and Pace Pakistan
Assuming the 90 days trading horizon MCB Bank is expected to generate 1.12 times less return on investment than Pace Pakistan. But when comparing it to its historical volatility, MCB Bank is 2.8 times less risky than Pace Pakistan. It trades about 0.16 of its potential returns per unit of risk. Pace Pakistan is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 251.00 in Pace Pakistan on October 30, 2024 and sell it today you would earn a total of 391.00 from holding Pace Pakistan or generate 155.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.89% |
| Values | Daily Returns |
MCB Bank vs. Pace Pakistan
Performance |
| Timeline |
| MCB Bank |
| Pace Pakistan |
MCB Bank and Pace Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Pace Pakistan
The main advantage of trading using opposite MCB Bank and Pace Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Pace Pakistan 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 Pace Pakistan will offset losses from the drop in Pace Pakistan's long position.| MCB Bank vs. Fateh Sports Wear | MCB Bank vs. Pakistan Reinsurance | MCB Bank vs. Universal Insurance | MCB Bank vs. Askari General Insurance |
| Pace Pakistan vs. Habib Insurance | Pace Pakistan vs. Ghandhara Automobile | Pace Pakistan vs. Shadab Textile Mills | Pace Pakistan vs. Century 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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