Correlation Between MCB Investment and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both MCB Investment and Faysal Bank 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 Faysal Bank 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 Faysal Bank, you can compare the effects of market volatilities on MCB Investment and Faysal Bank 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 Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Investment and Faysal Bank.
Diversification Opportunities for MCB Investment and Faysal Bank
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MCB and Faysal is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding MCB Investment Manag and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of MCB Investment i.e., MCB Investment and Faysal Bank go up and down completely randomly.
Pair Corralation between MCB Investment and Faysal Bank
Assuming the 90 days trading horizon MCB Investment Manag is expected to generate 1.22 times more return on investment than Faysal Bank. However, MCB Investment is 1.22 times more volatile than Faysal Bank. It trades about 0.4 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.03 per unit of risk. If you would invest 3,366 in MCB Investment Manag on August 30, 2024 and sell it today you would earn a total of 2,254 from holding MCB Investment Manag or generate 66.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
MCB Investment Manag vs. Faysal Bank
Performance |
| Timeline |
| MCB Investment Manag |
| Faysal Bank |
MCB Investment and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Investment and Faysal Bank
The main advantage of trading using opposite MCB Investment and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Investment position performs unexpectedly, Faysal Bank 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| MCB Investment vs. Habib Insurance | MCB Investment vs. Century Insurance | MCB Investment vs. Reliance Weaving Mills | MCB Investment vs. Media Times |
| Faysal Bank vs. Jubilee Life Insurance | Faysal Bank vs. EFU General Insurance | Faysal Bank vs. Wah Nobel Chemicals | Faysal Bank vs. Engro Polymer Chemicals |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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