Correlation Between Federal Bank and PTC India

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

By analyzing existing cross correlation between The Federal Bank and PTC India Financial, you can compare the effects of market volatilities on Federal Bank and PTC India 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 Federal Bank with a short position of PTC India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Bank and PTC India.

Diversification Opportunities for Federal Bank and PTC India

-0.32

Correlation Coefficient

Federal Bank  PTC India

Very good diversification

The 3 months correlation between Federal and PTC is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Federal Bank and PTC India Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTC India Financial and Federal Bank 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 The Federal Bank are associated (or correlated) with PTC India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTC India Financial has no effect on the direction of Federal Bank i.e., Federal Bank and PTC India go up and down completely randomly.

Pair Corralation between Federal Bank and PTC India

Assuming the 90 days trading horizon The Federal Bank is expected to under-perform the PTC India. But the stock apears to be less risky and, when comparing its historical volatility, The Federal Bank is 1.55 times less risky than PTC India. The stock trades about -0.12 of its potential returns per unit of risk. The PTC India Financial is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,386  in PTC India Financial on October 5, 2024 and sell it today you would lose (63.00) from holding PTC India Financial or give up 1.44% of portfolio value over 90 days.

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

The Federal Bank  vs.  PTC India Financial

Federal Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Federal Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, Federal Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

PTC India Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PTC India Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PTC India is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Federal Bank and PTC India

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

The idea behind The Federal Bank and PTC India Financial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.