Correlation Between Pace Pakistan and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Pace Pakistan 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 Pace Pakistan and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Pakistan and MCB Bank, you can compare the effects of market volatilities on Pace Pakistan 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 Pace Pakistan with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Pakistan and MCB Bank.
Diversification Opportunities for Pace Pakistan and MCB Bank
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pace and MCB is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pace Pakistan and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Pace Pakistan 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 Pace Pakistan 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 Pace Pakistan i.e., Pace Pakistan and MCB Bank go up and down completely randomly.
Pair Corralation between Pace Pakistan and MCB Bank
Assuming the 90 days trading horizon Pace Pakistan is expected to under-perform the MCB Bank. In addition to that, Pace Pakistan is 4.58 times more volatile than MCB Bank. It trades about -0.06 of its total potential returns per unit of risk. MCB Bank is currently generating about 0.01 per unit of volatility. If you would invest 28,732 in MCB Bank on October 29, 2024 and sell it today you would earn a total of 15.00 from holding MCB Bank or generate 0.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Pakistan vs. MCB Bank
Performance |
| Timeline |
| Pace Pakistan |
| MCB Bank |
Pace Pakistan and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Pakistan and MCB Bank
The main advantage of trading using opposite Pace Pakistan and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Pakistan 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.| Pace Pakistan vs. MCB Bank | Pace Pakistan vs. Universal Insurance | Pace Pakistan vs. Jubilee Life Insurance | Pace Pakistan vs. Fateh Sports Wear |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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