Correlation Between MCB GROUP and QUALITY BEVERAGES

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

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

Diversification Opportunities for MCB GROUP and QUALITY BEVERAGES

-0.17

Correlation Coefficient

MCB GROUP  QUALITY BEVERAGES

Good diversification

The 3 months correlation between MCB and QUALITY is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding MCB GROUP LTD and QUALITY BEVERAGES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QUALITY BEVERAGES LTD and MCB GROUP 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 MCB GROUP LTD are associated (or correlated) with QUALITY BEVERAGES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QUALITY BEVERAGES LTD has no effect on the direction of MCB GROUP i.e., MCB GROUP and QUALITY BEVERAGES go up and down completely randomly.

Pair Corralation between MCB GROUP and QUALITY BEVERAGES

Assuming the 90 days trading horizon MCB GROUP LTD is expected to generate 0.41 times more return on investment than QUALITY BEVERAGES. However, MCB GROUP LTD is 2.41 times less risky than QUALITY BEVERAGES. It trades about -0.23 of its potential returns per unit of risk. QUALITY BEVERAGES LTD is currently generating about -0.21 per unit of risk. If you would invest  1,050  in MCB GROUP LTD on September 23, 2024 and sell it today you would lose (30.00) from holding MCB GROUP LTD or give up 2.86% of portfolio value over 90 days.

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

MCB GROUP LTD  vs.  QUALITY BEVERAGES LTD

MCB GROUP LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCB GROUP LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

QUALITY BEVERAGES LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in QUALITY BEVERAGES LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, QUALITY BEVERAGES is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MCB GROUP and QUALITY BEVERAGES

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

The idea behind MCB GROUP LTD and QUALITY BEVERAGES LTD 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.