Correlation Between Air Link and MCB Investment

Can any of the company-specific risk be diversified away by investing in both Air Link 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 Air Link and MCB Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Link Communication and MCB Investment Manag, you can compare the effects of market volatilities on Air Link 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 Air Link with a short position of MCB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Link and MCB Investment.

Diversification Opportunities for Air Link and MCB Investment

-0.46

Correlation Coefficient

Air Link  MCB Investment

Very good diversification

The 3 months correlation between Air and MCB is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Air Link Communication 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 Air Link 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 Air Link Communication 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 Air Link i.e., Air Link and MCB Investment go up and down completely randomly.

Pair Corralation between Air Link and MCB Investment

Assuming the 90 days trading horizon Air Link Communication is expected to under-perform the MCB Investment. But the stock apears to be less risky and, when comparing its historical volatility, Air Link Communication is 1.43 times less risky than MCB Investment. The stock trades about -0.08 of its potential returns per unit of risk. The MCB Investment Manag is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6,111  in MCB Investment Manag on December 11, 2024 and sell it today you would earn a total of  1,797  from holding MCB Investment Manag or generate 29.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Air Link Communication  vs.  MCB Investment Manag

Air Link Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Link Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Air Link is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

MCB Investment Manag

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Investment Manag are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, MCB Investment disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Link and MCB Investment

The main advantage of trading using opposite Air Link and MCB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Link 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.

The idea behind Air Link Communication and MCB Investment Manag pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.