Correlation Between MCB Bank and Reliance Insurance
Can any of the company-specific risk be diversified away by investing in both MCB Bank and Reliance 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 Reliance 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 Reliance Insurance Co, you can compare the effects of market volatilities on MCB Bank and Reliance 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 Reliance Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Bank and Reliance Insurance.
Diversification Opportunities for MCB Bank and Reliance Insurance
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MCB and Reliance is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Reliance Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance 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 Reliance Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Insurance has no effect on the direction of MCB Bank i.e., MCB Bank and Reliance Insurance go up and down completely randomly.
Pair Corralation between MCB Bank and Reliance Insurance
Assuming the 90 days trading horizon MCB Bank is expected to generate 0.25 times more return on investment than Reliance Insurance. However, MCB Bank is 4.02 times less risky than Reliance Insurance. It trades about -0.03 of its potential returns per unit of risk. Reliance Insurance Co is currently generating about -0.08 per unit of risk. If you would invest 28,541 in MCB Bank on November 4, 2024 and sell it today you would lose (177.00) from holding MCB Bank or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
MCB Bank vs. Reliance Insurance Co
Performance |
| Timeline |
| MCB Bank |
| Reliance Insurance |
MCB Bank and Reliance Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Bank and Reliance Insurance
The main advantage of trading using opposite MCB Bank and Reliance Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Reliance 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 Reliance Insurance will offset losses from the drop in Reliance Insurance's long position.| MCB Bank vs. East West Insurance | MCB Bank vs. Habib Insurance | MCB Bank vs. Pakistan Reinsurance | MCB Bank vs. Century Insurance |
| Reliance Insurance vs. Fateh Sports Wear | Reliance Insurance vs. Century Insurance | Reliance Insurance vs. WorldCall Telecom | Reliance Insurance vs. 786 Investment Limited |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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