Correlation Between MCB Bank and Habib Insurance

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

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

Diversification Opportunities for MCB Bank and Habib Insurance

0.69

Correlation Coefficient

MCB Bank  Habib Insurance

Poor diversification

The 3 months correlation between MCB and Habib is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Habib Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Insurance 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 Habib Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Insurance has no effect on the direction of MCB Bank i.e., MCB Bank and Habib Insurance go up and down completely randomly.

Pair Corralation between MCB Bank and Habib Insurance

Assuming the 90 days trading horizon MCB Bank is expected to generate 10.55 times less return on investment than Habib Insurance. But when comparing it to its historical volatility, MCB Bank is 2.69 times less risky than Habib Insurance. It trades about 0.02 of its potential returns per unit of risk. Habib Insurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  841.00  in Habib Insurance on December 29, 2024 and sell it today you would earn a total of  86.00  from holding Habib Insurance or generate 10.23% return on investment over 90 days.

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

MCB Bank  vs.  Habib Insurance

MCB Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, MCB Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Habib Insurance

Risk-Adjusted Performance

Modest

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

Pair Trading with MCB Bank and Habib Insurance

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

The idea behind MCB Bank and Habib Insurance 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.