Correlation Between MCB Bank and Pakistan Synthetics
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Pakistan Synthetics 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 Synthetics 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 Synthetics, you can compare the effects of market volatilities on MCB Bank and Pakistan Synthetics 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 Synthetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Pakistan Synthetics.
Diversification Opportunities for MCB Bank and Pakistan Synthetics
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MCB and Pakistan is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Pakistan Synthetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Synthetics 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 Synthetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Synthetics has no effect on the direction of MCB Bank i.e., MCB Bank and Pakistan Synthetics go up and down completely randomly.
Pair Corralation between MCB Bank and Pakistan Synthetics
Assuming the 90 days trading horizon MCB Bank is expected to generate 0.54 times more return on investment than Pakistan Synthetics. However, MCB Bank is 1.85 times less risky than Pakistan Synthetics. It trades about 0.16 of its potential returns per unit of risk. Pakistan Synthetics is currently generating about 0.08 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 Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.36% |
| Values | Daily Returns |
MCB Bank vs. Pakistan Synthetics
Performance |
| Timeline |
| MCB Bank |
| Pakistan Synthetics |
MCB Bank and Pakistan Synthetics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Pakistan Synthetics
The main advantage of trading using opposite MCB Bank and Pakistan Synthetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Pakistan Synthetics 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 Synthetics will offset losses from the drop in Pakistan Synthetics' long position.| MCB Bank vs. Masood Textile Mills | MCB Bank vs. Fauji Foods | MCB Bank vs. KSB Pumps | MCB Bank vs. Mari Petroleum |
| Pakistan Synthetics vs. Masood Textile Mills | Pakistan Synthetics vs. Fauji Foods | Pakistan Synthetics vs. KSB Pumps | Pakistan Synthetics 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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