Correlation Between Coal India and PB Fintech

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

By analyzing existing cross correlation between Coal India Limited and PB Fintech Limited, you can compare the effects of market volatilities on Coal India and PB Fintech 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 Coal India with a short position of PB Fintech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coal India and PB Fintech.

Diversification Opportunities for Coal India and PB Fintech

-0.58

Correlation Coefficient

Coal India  PB Fintech

Excellent diversification

The 3 months correlation between Coal and POLICYBZR is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Coal India Limited and PB Fintech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PB Fintech Limited and Coal 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 Coal India Limited are associated (or correlated) with PB Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PB Fintech Limited has no effect on the direction of Coal India i.e., Coal India and PB Fintech go up and down completely randomly.

Pair Corralation between Coal India and PB Fintech

Assuming the 90 days trading horizon Coal India Limited is expected to under-perform the PB Fintech. But the stock apears to be less risky and, when comparing its historical volatility, Coal India Limited is 1.74 times less risky than PB Fintech. The stock trades about -0.17 of its potential returns per unit of risk. The PB Fintech Limited is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest  171,265  in PB Fintech Limited on September 20, 2024 and sell it today you would earn a total of  43,500  from holding PB Fintech Limited or generate 25.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Coal India Limited  vs.  PB Fintech Limited

Coal India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coal India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PB Fintech Limited

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PB Fintech Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, PB Fintech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coal India and PB Fintech

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

The idea behind Coal India Limited and PB Fintech Limited 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.