Correlation Between MCB Bank and Pakistan Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Pakistan Telecommunicatio 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 Telecommunicatio 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 Telecommunication, you can compare the effects of market volatilities on MCB Bank and Pakistan Telecommunicatio 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 Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Pakistan Telecommunicatio.
Diversification Opportunities for MCB Bank and Pakistan Telecommunicatio
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCB and Pakistan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Pakistan Telecommunication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Telecommunicatio 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 Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Telecommunicatio has no effect on the direction of MCB Bank i.e., MCB Bank and Pakistan Telecommunicatio go up and down completely randomly.
Pair Corralation between MCB Bank and Pakistan Telecommunicatio
Assuming the 90 days trading horizon MCB Bank is expected to generate 1.16 times less return on investment than Pakistan Telecommunicatio. But when comparing it to its historical volatility, MCB Bank is 1.99 times less risky than Pakistan Telecommunicatio. It trades about 0.18 of its potential returns per unit of risk. Pakistan Telecommunication is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 627.00 in Pakistan Telecommunication on August 31, 2024 and sell it today you would earn a total of 1,407 from holding Pakistan Telecommunication or generate 224.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MCB Bank vs. Pakistan Telecommunication
Performance |
| Timeline |
| MCB Bank |
| Pakistan Telecommunicatio |
MCB Bank and Pakistan Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Pakistan Telecommunicatio
The main advantage of trading using opposite MCB Bank and Pakistan Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Pakistan Telecommunicatio 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 Telecommunicatio will offset losses from the drop in Pakistan Telecommunicatio'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 |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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