Correlation Between MCB Investment and Universal Insurance

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

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

Diversification Opportunities for MCB Investment and Universal Insurance

0.26

Correlation Coefficient

MCB Investment  Universal Insurance

Modest diversification

The 3 months correlation between MCB and Universal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding MCB Investment Manag and Universal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and MCB Investment 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 Investment Manag are associated (or correlated) with Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of MCB Investment i.e., MCB Investment and Universal Insurance go up and down completely randomly.

Pair Corralation between MCB Investment and Universal Insurance

Assuming the 90 days trading horizon MCB Investment Manag is expected to generate 0.47 times more return on investment than Universal Insurance. However, MCB Investment Manag is 2.15 times less risky than Universal Insurance. It trades about 0.18 of its potential returns per unit of risk. Universal Insurance is currently generating about 0.0 per unit of risk. If you would invest  6,137  in MCB Investment Manag on December 25, 2024 and sell it today you would earn a total of  1,963  from holding MCB Investment Manag or generate 31.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

MCB Investment Manag  vs.  Universal Insurance

MCB Investment Manag

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Investment Manag are ranked lower than 14 (%) 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.

Universal Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Universal Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MCB Investment and Universal Insurance

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

The idea behind MCB Investment Manag and Universal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.