Correlation Between Entertainment Network and PVR INOX

Can any of the company-specific risk be diversified away by investing in both Entertainment Network and PVR INOX 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 Entertainment Network and PVR INOX into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Entertainment Network and PVR INOX

0.75

Correlation Coefficient

Entertainment Network  PVR INOX

Poor diversification

The 3 months correlation between Entertainment and PVR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Entertainment Network Limited and PVR INOX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVR INOX and Entertainment Network 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 Entertainment Network Limited are associated (or correlated) with PVR INOX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVR INOX has no effect on the direction of Entertainment Network i.e., Entertainment Network and PVR INOX go up and down completely randomly.

Pair Corralation between Entertainment Network and PVR INOX

Assuming the 90 days trading horizon Entertainment Network Limited is expected to generate 1.58 times more return on investment than PVR INOX. However, Entertainment Network is 1.58 times more volatile than PVR INOX. It trades about 0.01 of its potential returns per unit of risk. PVR INOX is currently generating about -0.05 per unit of risk. If you would invest  19,168  in Entertainment Network Limited on September 12, 2024 and sell it today you would lose (231.00) from holding Entertainment Network Limited or give up 1.21% of portfolio value over 90 days.

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

Entertainment Network Limited  vs.  PVR INOX

Entertainment Network

Risk-Adjusted Performance

0 of 100

Very Weak

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

PVR INOX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PVR INOX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, PVR INOX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Entertainment Network and PVR INOX

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

The idea behind Entertainment Network Limited and PVR INOX 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.