Correlation Between Murree Brewery and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Murree Brewery 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 Murree Brewery and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Murree Brewery and MCB Bank, you can compare the effects of market volatilities on Murree Brewery 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 Murree Brewery with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murree Brewery and MCB Bank.
Diversification Opportunities for Murree Brewery and MCB Bank
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Murree and MCB is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Murree Brewery and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Murree Brewery 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 Murree Brewery 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 Murree Brewery i.e., Murree Brewery and MCB Bank go up and down completely randomly.
Pair Corralation between Murree Brewery and MCB Bank
Assuming the 90 days trading horizon Murree Brewery is expected to generate 2.37 times more return on investment than MCB Bank. However, Murree Brewery is 2.37 times more volatile than MCB Bank. It trades about 0.25 of its potential returns per unit of risk. MCB Bank is currently generating about -0.09 per unit of risk. If you would invest 72,091 in Murree Brewery on October 30, 2024 and sell it today you would earn a total of 7,916 from holding Murree Brewery or generate 10.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Murree Brewery vs. MCB Bank
Performance |
| Timeline |
| Murree Brewery |
| MCB Bank |
Murree Brewery and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Murree Brewery and MCB Bank
The main advantage of trading using opposite Murree Brewery and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murree Brewery 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.| Murree Brewery vs. Metropolitan Steel Corp | Murree Brewery vs. International Steels | Murree Brewery vs. Dost Steels | Murree Brewery vs. Data Agro |
| MCB Bank vs. Fateh Sports Wear | MCB Bank vs. Pakistan Reinsurance | MCB Bank vs. Universal Insurance | MCB Bank vs. Askari General Insurance |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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