Correlation Between MCB Investment and Fauji Fertilizer
Can any of the company-specific risk be diversified away by investing in both MCB Investment and Fauji Fertilizer 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 Fauji Fertilizer 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 Fauji Fertilizer, you can compare the effects of market volatilities on MCB Investment and Fauji Fertilizer 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 Fauji Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Investment and Fauji Fertilizer.
Diversification Opportunities for MCB Investment and Fauji Fertilizer
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCB and Fauji is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MCB Investment Manag and Fauji Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Fertilizer 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 Fauji Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Fertilizer has no effect on the direction of MCB Investment i.e., MCB Investment and Fauji Fertilizer go up and down completely randomly.
Pair Corralation between MCB Investment and Fauji Fertilizer
Assuming the 90 days trading horizon MCB Investment Manag is expected to generate 2.1 times more return on investment than Fauji Fertilizer. However, MCB Investment is 2.1 times more volatile than Fauji Fertilizer. It trades about 0.12 of its potential returns per unit of risk. Fauji Fertilizer is currently generating about 0.23 per unit of risk. If you would invest 1,546 in MCB Investment Manag on September 12, 2024 and sell it today you would earn a total of 4,859 from holding MCB Investment Manag or generate 314.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.69% |
| Values | Daily Returns |
MCB Investment Manag vs. Fauji Fertilizer
Performance |
| Timeline |
| MCB Investment Manag |
| Fauji Fertilizer |
MCB Investment and Fauji Fertilizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Investment and Fauji Fertilizer
The main advantage of trading using opposite MCB Investment and Fauji Fertilizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Investment position performs unexpectedly, Fauji Fertilizer 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 Fauji Fertilizer will offset losses from the drop in Fauji Fertilizer's long position.| MCB Investment vs. Habib Insurance | MCB Investment vs. Ghandhara Automobile | MCB Investment vs. Century Insurance | MCB Investment vs. Reliance Weaving Mills |
| Fauji Fertilizer vs. Masood Textile Mills | Fauji Fertilizer vs. Fauji Foods | Fauji Fertilizer vs. KSB Pumps | Fauji Fertilizer 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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