Correlation Between COSMO FIRST and Punjab National

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

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

Diversification Opportunities for COSMO FIRST and Punjab National

0.3

Correlation Coefficient

COSMO FIRST  Punjab National

Weak diversification

The 3 months correlation between COSMO and Punjab is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED 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 COSMO FIRST 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 COSMO FIRST LIMITED 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 COSMO FIRST i.e., COSMO FIRST and Punjab National go up and down completely randomly.

Pair Corralation between COSMO FIRST and Punjab National

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 1.46 times more return on investment than Punjab National. However, COSMO FIRST is 1.46 times more volatile than Punjab National Bank. It trades about 0.11 of its potential returns per unit of risk. Punjab National Bank is currently generating about -0.03 per unit of risk. If you would invest  76,405  in COSMO FIRST LIMITED on September 26, 2024 and sell it today you would earn a total of  15,920  from holding COSMO FIRST LIMITED or generate 20.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

COSMO FIRST LIMITED  vs.  Punjab National Bank

COSMO FIRST LIMITED

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 COSMO FIRST and Punjab National

The main advantage of trading using opposite COSMO FIRST and Punjab National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSMO FIRST 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 COSMO FIRST LIMITED 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.