Correlation Between Millat Tractors and National Bank

Can any of the company-specific risk be diversified away by investing in both Millat Tractors and National 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 National 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 National Bank of, you can compare the effects of market volatilities on Millat Tractors and National 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Millat Tractors and National Bank.

Diversification Opportunities for Millat Tractors and National Bank

0.49

Correlation Coefficient

Millat Tractors  National Bank

Very weak diversification

The 3 months correlation between Millat and National is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Millat Tractors and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Millat Tractors i.e., Millat Tractors and National Bank go up and down completely randomly.

Pair Corralation between Millat Tractors and National Bank

Assuming the 90 days trading horizon Millat Tractors is expected to generate 0.54 times more return on investment than National Bank. However, Millat Tractors is 1.85 times less risky than National Bank. It trades about 0.12 of its potential returns per unit of risk. National Bank of is currently generating about 0.01 per unit of risk. If you would invest  54,859  in Millat Tractors on September 26, 2024 and sell it today you would earn a total of  7,585  from holding Millat Tractors or generate 13.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Millat Tractors  vs.  National Bank of

Millat Tractors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 9 (%) 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.

National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Millat Tractors and National Bank

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

The idea behind Millat Tractors and National Bank of 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.