Correlation Between MCB Investment and MCB Bank
Can any of the company-specific risk be diversified away by investing in both MCB Investment and MCB 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 MCB 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 MCB Bank, you can compare the effects of market volatilities on MCB Investment and MCB 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 MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Investment and MCB Bank.
Diversification Opportunities for MCB Investment and MCB Bank
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCB and MCB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MCB Investment Manag and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB 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 MCB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Bank has no effect on the direction of MCB Investment i.e., MCB Investment and MCB Bank go up and down completely randomly.
Pair Corralation between MCB Investment and MCB Bank
Assuming the 90 days trading horizon MCB Investment Manag is expected to generate 1.4 times more return on investment than MCB Bank. However, MCB Investment is 1.4 times more volatile than MCB Bank. It trades about 0.19 of its potential returns per unit of risk. MCB Bank is currently generating about 0.14 per unit of risk. If you would invest 2,468 in MCB Investment Manag on September 4, 2024 and sell it today you would earn a total of 4,391 from holding MCB Investment Manag or generate 177.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.67% |
| Values | Daily Returns |
MCB Investment Manag vs. MCB Bank
Performance |
| Timeline |
| MCB Investment Manag |
| MCB Bank |
MCB Investment and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Investment and MCB Bank
The main advantage of trading using opposite MCB Investment and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Investment position performs unexpectedly, MCB 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 MCB Bank will offset losses from the drop in MCB Bank's long position.| MCB Investment vs. Habib Insurance | MCB Investment vs. Pakistan Refinery | MCB Investment vs. Century Insurance | MCB Investment vs. Reliance Weaving Mills |
| MCB Bank vs. Masood Textile Mills | MCB Bank vs. Fauji Foods | MCB Bank vs. KSB Pumps | MCB Bank 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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