Correlation Between MCB Investment and Engro Polymer
Can any of the company-specific risk be diversified away by investing in both MCB Investment and Engro Polymer 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 Investment and Engro Polymer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCB Investment Manag and Engro Polymer Chemicals, you can compare the effects of market volatilities on MCB Investment and Engro Polymer 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 Investment with a short position of Engro Polymer. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Investment and Engro Polymer.
Diversification Opportunities for MCB Investment and Engro Polymer
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCB and Engro is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MCB Investment Manag and Engro Polymer Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro Polymer Chemicals and MCB Investment 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 Investment Manag are associated (or correlated) with Engro Polymer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engro Polymer Chemicals has no effect on the direction of MCB Investment i.e., MCB Investment and Engro Polymer go up and down completely randomly.
Pair Corralation between MCB Investment and Engro Polymer
Assuming the 90 days trading horizon MCB Investment Manag is expected to generate 2.54 times more return on investment than Engro Polymer. However, MCB Investment is 2.54 times more volatile than Engro Polymer Chemicals. It trades about 0.01 of its potential returns per unit of risk. Engro Polymer Chemicals is currently generating about -0.17 per unit of risk. If you would invest 6,552 in MCB Investment Manag on October 25, 2024 and sell it today you would lose (24.00) from holding MCB Investment Manag or give up 0.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MCB Investment Manag vs. Engro Polymer Chemicals
Performance |
| Timeline |
| MCB Investment Manag |
| Engro Polymer Chemicals |
MCB Investment and Engro Polymer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Investment and Engro Polymer
The main advantage of trading using opposite MCB Investment and Engro Polymer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Investment position performs unexpectedly, Engro Polymer 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 Engro Polymer will offset losses from the drop in Engro Polymer's long position.| MCB Investment vs. Air Link Communication | MCB Investment vs. Oil and Gas | MCB Investment vs. Matco Foods | MCB Investment vs. Hi Tech Lubricants |
| Engro Polymer vs. MCB Investment Manag | Engro Polymer vs. Fateh Sports Wear | Engro Polymer vs. Ittehad Chemicals | Engro Polymer vs. Murree Brewery |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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