Correlation Between Oil and MCB Investment
Can any of the company-specific risk be diversified away by investing in both Oil and MCB Investment 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 Oil and MCB Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil and Gas and MCB Investment Manag, you can compare the effects of market volatilities on Oil and MCB Investment 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 Oil with a short position of MCB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil and MCB Investment.
Diversification Opportunities for Oil and MCB Investment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oil and MCB is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and MCB Investment Manag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Investment Manag and Oil 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 Oil and Gas are associated (or correlated) with MCB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Investment Manag has no effect on the direction of Oil i.e., Oil and MCB Investment go up and down completely randomly.
Pair Corralation between Oil and MCB Investment
Assuming the 90 days trading horizon Oil is expected to generate 2.93 times less return on investment than MCB Investment. But when comparing it to its historical volatility, Oil and Gas is 1.29 times less risky than MCB Investment. It trades about 0.1 of its potential returns per unit of risk. MCB Investment Manag is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4,694 in MCB Investment Manag on October 25, 2024 and sell it today you would earn a total of 1,834 from holding MCB Investment Manag or generate 39.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil and Gas vs. MCB Investment Manag
Performance |
| Timeline |
| Oil and Gas |
| MCB Investment Manag |
Oil and MCB Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil and MCB Investment
The main advantage of trading using opposite Oil and MCB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil position performs unexpectedly, MCB Investment 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 Investment will offset losses from the drop in MCB Investment's long position.| Oil vs. Unilever Pakistan Foods | Oil vs. Pakistan Telecommunication | Oil vs. Pakistan Tobacco | Oil vs. Unity Foods |
| MCB Investment vs. Air Link Communication | MCB Investment vs. Oil and Gas | MCB Investment vs. Matco Foods | MCB Investment vs. Hi Tech Lubricants |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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