Correlation Between IG Petrochemicals and Punjab Sind

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

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

Diversification Opportunities for IG Petrochemicals and Punjab Sind

0.8

Correlation Coefficient

IG Petrochemicals  Punjab Sind

Very poor diversification

The 3 months correlation between IGPL and Punjab is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding IG Petrochemicals Limited and Punjab Sind Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Punjab Sind Bank and IG Petrochemicals 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 IG Petrochemicals Limited are associated (or correlated) with Punjab Sind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Punjab Sind Bank has no effect on the direction of IG Petrochemicals i.e., IG Petrochemicals and Punjab Sind go up and down completely randomly.

Pair Corralation between IG Petrochemicals and Punjab Sind

Assuming the 90 days trading horizon IG Petrochemicals Limited is expected to generate 1.03 times more return on investment than Punjab Sind. However, IG Petrochemicals is 1.03 times more volatile than Punjab Sind Bank. It trades about -0.05 of its potential returns per unit of risk. Punjab Sind Bank is currently generating about -0.07 per unit of risk. If you would invest  62,018  in IG Petrochemicals Limited on October 22, 2024 and sell it today you would lose (12,898) from holding IG Petrochemicals Limited or give up 20.8% of portfolio value over 90 days.

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

IG Petrochemicals Limited  vs.  Punjab Sind Bank

IG Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IG Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Punjab Sind Bank

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Punjab Sind Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Punjab Sind is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IG Petrochemicals and Punjab Sind

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

The idea behind IG Petrochemicals Limited and Punjab Sind 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.