Correlation Between AKD Hospitality and MCB Bank

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

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

Diversification Opportunities for AKD Hospitality and MCB Bank

-0.13

Correlation Coefficient

AKD Hospitality  MCB Bank

Good diversification

The 3 months correlation between AKD and MCB is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding AKD Hospitality and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and AKD Hospitality 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 AKD Hospitality 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 AKD Hospitality i.e., AKD Hospitality and MCB Bank go up and down completely randomly.

Pair Corralation between AKD Hospitality and MCB Bank

Assuming the 90 days trading horizon AKD Hospitality is expected to generate 3.29 times less return on investment than MCB Bank. In addition to that, AKD Hospitality is 1.32 times more volatile than MCB Bank. It trades about 0.05 of its total potential returns per unit of risk. MCB Bank is currently generating about 0.24 per unit of volatility. If you would invest  20,965  in MCB Bank on September 5, 2024 and sell it today you would earn a total of  6,806  from holding MCB Bank or generate 32.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

AKD Hospitality  vs.  MCB Bank

AKD Hospitality

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AKD Hospitality are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, AKD Hospitality may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MCB Bank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Bank are ranked lower than 18 (%) 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 AKD Hospitality and MCB Bank

The main advantage of trading using opposite AKD Hospitality and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKD Hospitality 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 AKD Hospitality 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.