Correlation Between MCB INDIA and AFREXIMBANK

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

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

Diversification Opportunities for MCB INDIA and AFREXIMBANK

0.26

Correlation Coefficient

MCB INDIA  AFREXIMBANK

Modest diversification

The 3 months correlation between MCB and AFREXIMBANK is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding MCB INDIA SOVEREIGN and AFREXIMBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFREXIMBANK and MCB INDIA 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 INDIA SOVEREIGN are associated (or correlated) with AFREXIMBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFREXIMBANK has no effect on the direction of MCB INDIA i.e., MCB INDIA and AFREXIMBANK go up and down completely randomly.

Pair Corralation between MCB INDIA and AFREXIMBANK

Assuming the 90 days trading horizon MCB INDIA SOVEREIGN is expected to generate 2.72 times more return on investment than AFREXIMBANK. However, MCB INDIA is 2.72 times more volatile than AFREXIMBANK. It trades about 0.02 of its potential returns per unit of risk. AFREXIMBANK is currently generating about -0.07 per unit of risk. If you would invest  748.00  in MCB INDIA SOVEREIGN on September 12, 2024 and sell it today you would earn a total of  2.00  from holding MCB INDIA SOVEREIGN or generate 0.27% return on investment over 90 days.

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

MCB INDIA SOVEREIGN  vs.  AFREXIMBANK

MCB INDIA SOVEREIGN

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MCB INDIA SOVEREIGN are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, MCB INDIA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AFREXIMBANK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFREXIMBANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AFREXIMBANK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MCB INDIA and AFREXIMBANK

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

The idea behind MCB INDIA SOVEREIGN and AFREXIMBANK 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..