Correlation Between MCB Investment and Shell Pakistan
Can any of the company-specific risk be diversified away by investing in both MCB Investment and Shell Pakistan 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 Shell Pakistan 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 Shell Pakistan, you can compare the effects of market volatilities on MCB Investment and Shell Pakistan 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 Shell Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCB Investment and Shell Pakistan.
Diversification Opportunities for MCB Investment and Shell Pakistan
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCB and Shell is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MCB Investment Manag and Shell Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell Pakistan 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 Shell Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell Pakistan has no effect on the direction of MCB Investment i.e., MCB Investment and Shell Pakistan go up and down completely randomly.
Pair Corralation between MCB Investment and Shell Pakistan
Assuming the 90 days trading horizon MCB Investment Manag is expected to generate 1.23 times more return on investment than Shell Pakistan. However, MCB Investment is 1.23 times more volatile than Shell Pakistan. It trades about 0.19 of its potential returns per unit of risk. Shell Pakistan is currently generating about 0.01 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 4,119 from holding MCB Investment Manag or generate 166.9% 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. Shell Pakistan
Performance |
| Timeline |
| MCB Investment Manag |
| Shell Pakistan |
MCB Investment and Shell Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCB Investment and Shell Pakistan
The main advantage of trading using opposite MCB Investment and Shell Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Investment position performs unexpectedly, Shell Pakistan 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 Shell Pakistan will offset losses from the drop in Shell Pakistan's long position.| MCB Investment vs. Habib Insurance | MCB Investment vs. Pakistan Refinery | MCB Investment vs. Century Insurance | MCB Investment vs. Reliance Weaving Mills |
| Shell Pakistan vs. Masood Textile Mills | Shell Pakistan vs. Fauji Foods | Shell Pakistan vs. KSB Pumps | Shell Pakistan 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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