Correlation Between MCB Bank and Thatta Cement

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

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

Diversification Opportunities for MCB Bank and Thatta Cement

0.14

Correlation Coefficient

MCB Bank  Thatta Cement

Average diversification

The 3 months correlation between MCB and Thatta is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding MCB Bank and Thatta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thatta Cement 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 Thatta Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thatta Cement has no effect on the direction of MCB Bank i.e., MCB Bank and Thatta Cement go up and down completely randomly.

Pair Corralation between MCB Bank and Thatta Cement

Assuming the 90 days trading horizon MCB Bank is expected to generate 0.46 times more return on investment than Thatta Cement. However, MCB Bank is 2.18 times less risky than Thatta Cement. It trades about 0.02 of its potential returns per unit of risk. Thatta Cement is currently generating about 0.0 per unit of risk. If you would invest  27,841  in MCB Bank on December 30, 2024 and sell it today you would earn a total of  225.00  from holding MCB Bank or generate 0.81% return on investment over 90 days.

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

MCB Bank  vs.  Thatta Cement

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.

Thatta Cement

Risk-Adjusted Performance

Very Weak

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

Pair Trading with MCB Bank and Thatta Cement

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

The idea behind MCB Bank and Thatta Cement 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.