Correlation Between Millat Tractors and MCB Investment

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

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

Diversification Opportunities for Millat Tractors and MCB Investment

0.88

Correlation Coefficient

Millat Tractors  MCB Investment

Very poor diversification

The 3 months correlation between Millat and MCB is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Millat Tractors and MCB Investment Manag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Investment Manag and Millat Tractors 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 Millat Tractors are associated (or correlated) with MCB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Investment Manag has no effect on the direction of Millat Tractors i.e., Millat Tractors and MCB Investment go up and down completely randomly.

Pair Corralation between Millat Tractors and MCB Investment

Assuming the 90 days trading horizon Millat Tractors is expected to generate 12.73 times less return on investment than MCB Investment. But when comparing it to its historical volatility, Millat Tractors is 1.37 times less risky than MCB Investment. It trades about 0.02 of its potential returns per unit of risk. MCB Investment Manag is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,485  in MCB Investment Manag on October 3, 2024 and sell it today you would earn a total of  4,205  from holding MCB Investment Manag or generate 169.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.92%
Values	Daily Returns

Millat Tractors  vs.  MCB Investment Manag

Millat Tractors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Millat Tractors may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MCB Investment Manag

Risk-Adjusted Performance

24 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Investment Manag are ranked lower than 24 (%) 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.

Pair Trading with Millat Tractors and MCB Investment

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

The idea behind Millat Tractors and MCB Investment Manag 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.