Correlation Between Amreli Steels and Bank of Punjab

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

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

Diversification Opportunities for Amreli Steels and Bank of Punjab

-0.8

Correlation Coefficient

Amreli Steels  Bank of Punjab

Pay attention - limited upside

The 3 months correlation between Amreli and Bank is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Amreli Steels and Bank of Punjab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Punjab and Amreli Steels 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 Amreli Steels are associated (or correlated) with Bank of Punjab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Punjab has no effect on the direction of Amreli Steels i.e., Amreli Steels and Bank of Punjab go up and down completely randomly.

Pair Corralation between Amreli Steels and Bank of Punjab

Assuming the 90 days trading horizon Amreli Steels is expected to under-perform the Bank of Punjab. But the stock apears to be less risky and, when comparing its historical volatility, Amreli Steels is 1.68 times less risky than Bank of Punjab. The stock trades about -0.15 of its potential returns per unit of risk. The Bank of Punjab is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  845.00  in Bank of Punjab on December 22, 2024 and sell it today you would earn a total of  307.00  from holding Bank of Punjab or generate 36.33% return on investment over 90 days.

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

Amreli Steels  vs.  Bank of Punjab

Amreli Steels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amreli Steels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bank of Punjab

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Punjab are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank of Punjab reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amreli Steels and Bank of Punjab

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

The idea behind Amreli Steels and Bank of Punjab 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.