Correlation Between Sindh Modaraba and MCB Investment

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

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

Diversification Opportunities for Sindh Modaraba and MCB Investment

0.7

Correlation Coefficient

Sindh Modaraba  MCB Investment

Poor diversification

The 3 months correlation between Sindh and MCB is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sindh Modaraba Management 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 Sindh Modaraba 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 Sindh Modaraba Management 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 Sindh Modaraba i.e., Sindh Modaraba and MCB Investment go up and down completely randomly.

Pair Corralation between Sindh Modaraba and MCB Investment

Assuming the 90 days trading horizon Sindh Modaraba is expected to generate 3.1 times less return on investment than MCB Investment. In addition to that, Sindh Modaraba is 1.06 times more volatile than MCB Investment Manag. It trades about 0.04 of its total potential returns per unit of risk. MCB Investment Manag is currently generating about 0.15 per unit of volatility. If you would invest  6,495  in MCB Investment Manag on December 28, 2024 and sell it today you would earn a total of  1,628  from holding MCB Investment Manag or generate 25.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Sindh Modaraba Management  vs.  MCB Investment Manag

Sindh Modaraba Management

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sindh Modaraba Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Sindh Modaraba may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, MCB Investment disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sindh Modaraba and MCB Investment

The main advantage of trading using opposite Sindh Modaraba and MCB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sindh Modaraba 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 Sindh Modaraba Management 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.