Correlation Between DMCC SPECIALITY and Punjab National

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

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

Diversification Opportunities for DMCC SPECIALITY and Punjab National

0.36

Correlation Coefficient

DMCC SPECIALITY  Punjab National

Weak diversification

The 3 months correlation between DMCC and Punjab is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding DMCC SPECIALITY CHEMICALS 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 DMCC SPECIALITY 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 DMCC SPECIALITY CHEMICALS 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 DMCC SPECIALITY i.e., DMCC SPECIALITY and Punjab National go up and down completely randomly.

Pair Corralation between DMCC SPECIALITY and Punjab National

Assuming the 90 days trading horizon DMCC SPECIALITY CHEMICALS is expected to generate 2.52 times more return on investment than Punjab National. However, DMCC SPECIALITY is 2.52 times more volatile than Punjab National Bank. It trades about 0.3 of its potential returns per unit of risk. Punjab National Bank is currently generating about 0.12 per unit of risk. If you would invest  29,215  in DMCC SPECIALITY CHEMICALS on September 22, 2024 and sell it today you would earn a total of  9,765  from holding DMCC SPECIALITY CHEMICALS or generate 33.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

DMCC SPECIALITY CHEMICALS  vs.  Punjab National Bank

DMCC SPECIALITY CHEMICALS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DMCC SPECIALITY CHEMICALS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DMCC SPECIALITY unveiled 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 latest inconsistent performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with DMCC SPECIALITY and Punjab National

The main advantage of trading using opposite DMCC SPECIALITY and Punjab National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DMCC SPECIALITY 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 DMCC SPECIALITY CHEMICALS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.