Correlation Between United Insurance and MCB Bank
Can any of the company-specific risk be diversified away by investing in both United Insurance 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 United Insurance and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Insurance and MCB Bank, you can compare the effects of market volatilities on United Insurance 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 United Insurance with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and MCB Bank.
Diversification Opportunities for United Insurance and MCB Bank
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and MCB is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and United Insurance 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 United Insurance 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 United Insurance i.e., United Insurance and MCB Bank go up and down completely randomly.
Pair Corralation between United Insurance and MCB Bank
Assuming the 90 days trading horizon United Insurance is expected to under-perform the MCB Bank. But the stock apears to be less risky and, when comparing its historical volatility, United Insurance is 1.58 times less risky than MCB Bank. The stock trades about -0.24 of its potential returns per unit of risk. The MCB Bank is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 25,149 in MCB Bank on August 27, 2024 and sell it today you would earn a total of 1,083 from holding MCB Bank or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Insurance vs. MCB Bank
Performance |
| Timeline |
| United Insurance |
| MCB Bank |
United Insurance and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Insurance and MCB Bank
The main advantage of trading using opposite United Insurance and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Insurance 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.| United Insurance vs. Habib Bank | United Insurance vs. National Bank of | United Insurance vs. United Bank | United Insurance vs. MCB Bank |
| MCB Bank vs. Jubilee Life Insurance | MCB Bank vs. Security Investment Bank | MCB Bank vs. Askari General Insurance | MCB Bank vs. United 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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