Correlation Between Meezan Bank and Oil
Can any of the company-specific risk be diversified away by investing in both Meezan Bank and Oil 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 Meezan Bank and Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meezan Bank and Oil and Gas, you can compare the effects of market volatilities on Meezan Bank and Oil 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 Meezan Bank with a short position of Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meezan Bank and Oil.
Diversification Opportunities for Meezan Bank and Oil
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meezan and Oil is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Meezan Bank and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas and Meezan Bank 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 Meezan Bank are associated (or correlated) with Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Meezan Bank i.e., Meezan Bank and Oil go up and down completely randomly.
Pair Corralation between Meezan Bank and Oil
Assuming the 90 days trading horizon Meezan Bank is expected to generate 1.52 times more return on investment than Oil. However, Meezan Bank is 1.52 times more volatile than Oil and Gas. It trades about 0.1 of its potential returns per unit of risk. Oil and Gas is currently generating about -0.03 per unit of risk. If you would invest 22,809 in Meezan Bank on September 12, 2024 and sell it today you would earn a total of 1,545 from holding Meezan Bank or generate 6.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meezan Bank vs. Oil and Gas
Performance |
| Timeline |
| Meezan Bank |
| Oil and Gas |
Meezan Bank and Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meezan Bank and Oil
The main advantage of trading using opposite Meezan Bank and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meezan Bank position performs unexpectedly, Oil 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 Oil will offset losses from the drop in Oil's long position.| Meezan Bank vs. Adamjee Insurance | Meezan Bank vs. NetSol Technologies | Meezan Bank vs. 786 Investment Limited | Meezan 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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