Correlation Between Nimir Industrial and MCB Bank

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

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

Diversification Opportunities for Nimir Industrial and MCB Bank

0.65

Correlation Coefficient

Nimir Industrial  MCB Bank

Poor diversification

The 3 months correlation between Nimir and MCB is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nimir Industrial Chemical and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Nimir Industrial 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 Nimir Industrial Chemical are associated (or correlated) with MCB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Bank has no effect on the direction of Nimir Industrial i.e., Nimir Industrial and MCB Bank go up and down completely randomly.

Pair Corralation between Nimir Industrial and MCB Bank

Assuming the 90 days trading horizon Nimir Industrial Chemical is expected to generate 0.86 times more return on investment than MCB Bank. However, Nimir Industrial Chemical is 1.17 times less risky than MCB Bank. It trades about 0.26 of its potential returns per unit of risk. MCB Bank is currently generating about 0.07 per unit of risk. If you would invest  11,374  in Nimir Industrial Chemical on September 13, 2024 and sell it today you would earn a total of  2,726  from holding Nimir Industrial Chemical or generate 23.97% return on investment over 90 days.

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

Nimir Industrial Chemical  vs.  MCB Bank

Nimir Industrial Chemical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nimir Industrial Chemical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nimir Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

MCB Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MCB Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nimir Industrial and MCB Bank

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

The idea behind Nimir Industrial Chemical and MCB 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.