Correlation Between Habib Insurance and MCB Investment

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

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

Diversification Opportunities for Habib Insurance and MCB Investment

0.68

Correlation Coefficient

Habib Insurance  MCB Investment

Poor diversification

The 3 months correlation between Habib and MCB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Habib Insurance 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 Habib 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 Habib Insurance 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 Habib Insurance i.e., Habib Insurance and MCB Investment go up and down completely randomly.

Pair Corralation between Habib Insurance and MCB Investment

Assuming the 90 days trading horizon Habib Insurance is expected to generate 1.41 times less return on investment than MCB Investment. In addition to that, Habib Insurance is 1.16 times more volatile than MCB Investment Manag. It trades about 0.17 of its total potential returns per unit of risk. MCB Investment Manag is currently generating about 0.27 per unit of volatility. If you would invest  3,713  in MCB Investment Manag on September 12, 2024 and sell it today you would earn a total of  2,692  from holding MCB Investment Manag or generate 72.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.71%
Values	Daily Returns

Habib Insurance  vs.  MCB Investment Manag

Habib Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Habib Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

MCB Investment Manag

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Investment Manag are ranked lower than 21 (%) 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 Habib Insurance and MCB Investment

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

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.