Correlation Between Loads and MCB Bank

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

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

Diversification Opportunities for Loads and MCB Bank

0.05

Correlation Coefficient

Loads  MCB Bank

Significant diversification

The 3 months correlation between Loads and MCB is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Loads and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Loads 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 Loads 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 Loads i.e., Loads and MCB Bank go up and down completely randomly.

Pair Corralation between Loads and MCB Bank

Assuming the 90 days trading horizon Loads is expected to generate 2.5 times more return on investment than MCB Bank. However, Loads is 2.5 times more volatile than MCB Bank. It trades about 0.09 of its potential returns per unit of risk. MCB Bank is currently generating about 0.08 per unit of risk. If you would invest  1,516  in Loads on December 27, 2024 and sell it today you would earn a total of  264.00  from holding Loads or generate 17.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Loads  vs.  MCB Bank

Loads

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

MCB Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MCB Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Loads and MCB Bank

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

The idea behind Loads and MCB Bank 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.