Correlation Between MCB Bank and Pakistan International
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Pakistan International 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 Pakistan International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and Pakistan International Bulk, you can compare the effects of market volatilities on MCB Bank and Pakistan International 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 Pakistan International. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Pakistan International.
Diversification Opportunities for MCB Bank and Pakistan International
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MCB and Pakistan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Pakistan International Bulk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan International 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 Pakistan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan International has no effect on the direction of MCB Bank i.e., MCB Bank and Pakistan International go up and down completely randomly.
Pair Corralation between MCB Bank and Pakistan International
Assuming the 90 days trading horizon MCB Bank is expected to generate 1.4 times less return on investment than Pakistan International. But when comparing it to its historical volatility, MCB Bank is 1.97 times less risky than Pakistan International. It trades about 0.18 of its potential returns per unit of risk. Pakistan International Bulk is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 604.00 in Pakistan International Bulk on September 12, 2024 and sell it today you would earn a total of 203.00 from holding Pakistan International Bulk or generate 33.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MCB Bank vs. Pakistan International Bulk
Performance |
| Timeline |
| MCB Bank |
| Pakistan International |
MCB Bank and Pakistan International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Pakistan International
The main advantage of trading using opposite MCB Bank and Pakistan International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Pakistan International 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 Pakistan International will offset losses from the drop in Pakistan International's long position.| MCB Bank vs. Oil and Gas | MCB Bank vs. Pakistan State Oil | MCB Bank vs. Pakistan Petroleum | MCB Bank vs. Fauji Fertilizer |
| Pakistan International vs. 786 Investment Limited | Pakistan International vs. IBL HealthCare | Pakistan International vs. MCB Investment Manag | Pakistan International vs. AKD Hospitality |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |