Correlation Between Data Agro and Bank of Punjab

Can any of the company-specific risk be diversified away by investing in both Data Agro 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 Data Agro 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 Data Agro and Bank of Punjab, you can compare the effects of market volatilities on Data Agro 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 Data Agro with a short position of Bank of Punjab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data Agro and Bank of Punjab.

Diversification Opportunities for Data Agro and Bank of Punjab

0.64

Correlation Coefficient

Data Agro  Bank of Punjab

Poor diversification

The 3 months correlation between Data and Bank is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Data Agro 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 Data Agro 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 Data Agro 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 Data Agro i.e., Data Agro and Bank of Punjab go up and down completely randomly.

Pair Corralation between Data Agro and Bank of Punjab

Assuming the 90 days trading horizon Data Agro is expected to generate 2.05 times more return on investment than Bank of Punjab. However, Data Agro is 2.05 times more volatile than Bank of Punjab. It trades about 0.18 of its potential returns per unit of risk. Bank of Punjab is currently generating about 0.14 per unit of risk. If you would invest  1,492  in Data Agro on October 8, 2024 and sell it today you would earn a total of  11,802  from holding Data Agro or generate 791.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.11%
Values	Daily Returns

Data Agro  vs.  Bank of Punjab

Data Agro

Risk-Adjusted Performance

13 of 100

Good

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

Bank of Punjab

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Punjab are ranked lower than 23 (%) 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 Data Agro and Bank of Punjab

The main advantage of trading using opposite Data Agro and Bank of Punjab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data Agro 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 Data Agro 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.