Correlation Between MCB Bank and Premier Insurance
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Premier Insurance 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 Premier Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Bank and Premier Insurance, you can compare the effects of market volatilities on MCB Bank and Premier Insurance 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 Premier Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Premier Insurance.
Diversification Opportunities for MCB Bank and Premier Insurance
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MCB and Premier is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Insurance 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 Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of MCB Bank i.e., MCB Bank and Premier Insurance go up and down completely randomly.
Pair Corralation between MCB Bank and Premier Insurance
Assuming the 90 days trading horizon MCB Bank is expected to generate 0.46 times more return on investment than Premier Insurance. However, MCB Bank is 2.17 times less risky than Premier Insurance. It trades about 0.11 of its potential returns per unit of risk. Premier Insurance is currently generating about -0.09 per unit of risk. If you would invest 25,149 in MCB Bank on August 27, 2024 and sell it today you would earn a total of 1,083 from holding MCB Bank or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 80.95% |
| Values | Daily Returns |
MCB Bank vs. Premier Insurance
Performance |
| Timeline |
| MCB Bank |
| Premier Insurance |
MCB Bank and Premier Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Premier Insurance
The main advantage of trading using opposite MCB Bank and Premier Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Premier Insurance 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 Premier Insurance will offset losses from the drop in Premier Insurance's long position.| MCB Bank vs. Jubilee Life Insurance | MCB Bank vs. Security Investment Bank | MCB Bank vs. Askari General Insurance | MCB Bank vs. United Insurance |
| Premier Insurance vs. Habib Bank | Premier Insurance vs. National Bank of | Premier Insurance vs. United Bank | Premier Insurance vs. MCB Bank |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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