Correlation Between Nishat Mills and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Nishat Mills 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 Nishat Mills and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nishat Mills and MCB Bank, you can compare the effects of market volatilities on Nishat Mills 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 Nishat Mills with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nishat Mills and MCB Bank.
Diversification Opportunities for Nishat Mills and MCB Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nishat and MCB is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nishat Mills and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Nishat Mills 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 Nishat Mills 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 Nishat Mills i.e., Nishat Mills and MCB Bank go up and down completely randomly.
Pair Corralation between Nishat Mills and MCB Bank
Assuming the 90 days trading horizon Nishat Mills is expected to under-perform the MCB Bank. But the stock apears to be less risky and, when comparing its historical volatility, Nishat Mills is 1.0 times less risky than MCB Bank. The stock trades about -0.1 of its potential returns per unit of risk. The MCB Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 26,731 in MCB Bank on October 21, 2024 and sell it today you would earn a total of 1,675 from holding MCB Bank or generate 6.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nishat Mills vs. MCB Bank
Performance |
| Timeline |
| Nishat Mills |
| MCB Bank |
Nishat Mills and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nishat Mills and MCB Bank
The main advantage of trading using opposite Nishat Mills and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nishat Mills 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.| Nishat Mills vs. Masood Textile Mills | Nishat Mills vs. Fauji Foods | Nishat Mills vs. KSB Pumps | Nishat Mills vs. Mari Petroleum |
| MCB Bank vs. Avanceon | MCB Bank vs. United Insurance | MCB Bank vs. International Steels | MCB Bank vs. Beco Steel |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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