Correlation Between California Software and Punjab National

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

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

Diversification Opportunities for California Software and Punjab National

0.0

Correlation Coefficient

California Software  Punjab National

Pay attention - limited upside

The 3 months correlation between California and Punjab is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding California Software and Punjab National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Punjab National Bank and California Software 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 California Software are associated (or correlated) with Punjab National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Punjab National Bank has no effect on the direction of California Software i.e., California Software and Punjab National go up and down completely randomly.

Pair Corralation between California Software and Punjab National

Assuming the 90 days trading horizon California Software is expected to generate 4.93 times less return on investment than Punjab National. In addition to that, California Software is 1.48 times more volatile than Punjab National Bank. It trades about 0.01 of its total potential returns per unit of risk. Punjab National Bank is currently generating about 0.07 per unit of volatility. If you would invest  5,581  in Punjab National Bank on October 10, 2024 and sell it today you would earn a total of  4,730  from holding Punjab National Bank or generate 84.75% return on investment over 90 days.

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

California Software  vs.  Punjab National Bank

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, California Software is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Punjab National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with California Software and Punjab National

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

The idea behind California Software and Punjab National 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.