Correlation Between Millat Tractors and Meezan Bank

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

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

Diversification Opportunities for Millat Tractors and Meezan Bank

0.24

Correlation Coefficient

Millat Tractors  Meezan Bank

Modest diversification

The 3 months correlation between Millat and Meezan is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Millat Tractors and Meezan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meezan Bank 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 Meezan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meezan Bank has no effect on the direction of Millat Tractors i.e., Millat Tractors and Meezan Bank go up and down completely randomly.

Pair Corralation between Millat Tractors and Meezan Bank

Assuming the 90 days trading horizon Millat Tractors is expected to generate 1.04 times more return on investment than Meezan Bank. However, Millat Tractors is 1.04 times more volatile than Meezan Bank. It trades about 0.14 of its potential returns per unit of risk. Meezan Bank is currently generating about 0.01 per unit of risk. If you would invest  54,522  in Millat Tractors on October 15, 2024 and sell it today you would earn a total of  13,707  from holding Millat Tractors or generate 25.14% return on investment over 90 days.

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

Millat Tractors  vs.  Meezan Bank

Millat Tractors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Millat Tractors reported solid returns over the last few months and may actually be approaching a breakup point.

Meezan Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Millat Tractors and Meezan Bank

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

The idea behind Millat Tractors and Meezan Bank 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.