Correlation Between MCB Bank and Agha Steel

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

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

Diversification Opportunities for MCB Bank and Agha Steel

-0.55

Correlation Coefficient

MCB Bank  Agha Steel

Excellent diversification

The 3 months correlation between MCB and Agha is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Agha Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agha Steel Industries and MCB Bank 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 MCB Bank are associated (or correlated) with Agha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agha Steel Industries has no effect on the direction of MCB Bank i.e., MCB Bank and Agha Steel go up and down completely randomly.

Pair Corralation between MCB Bank and Agha Steel

Assuming the 90 days trading horizon MCB Bank is expected to generate 0.68 times more return on investment than Agha Steel. However, MCB Bank is 1.46 times less risky than Agha Steel. It trades about 0.22 of its potential returns per unit of risk. Agha Steel Industries is currently generating about 0.06 per unit of risk. If you would invest  26,350  in MCB Bank on October 25, 2024 and sell it today you would earn a total of  2,062  from holding MCB Bank or generate 7.83% return on investment over 90 days.

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

MCB Bank  vs.  Agha Steel Industries

MCB Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MCB Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Agha Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MCB Bank and Agha Steel

The main advantage of trading using opposite MCB Bank and Agha Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCB Bank position performs unexpectedly, Agha Steel 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 Agha Steel will offset losses from the drop in Agha Steel's long position.

The idea behind MCB Bank and Agha Steel Industries 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.