Correlation Between KIOCL and Punjab National

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

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

Diversification Opportunities for KIOCL and Punjab National

0.57

Correlation Coefficient

KIOCL  Punjab National

Very weak diversification

The 3 months correlation between KIOCL and Punjab is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited 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 KIOCL 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 KIOCL Limited 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 KIOCL i.e., KIOCL and Punjab National go up and down completely randomly.

Pair Corralation between KIOCL and Punjab National

Assuming the 90 days trading horizon KIOCL Limited is expected to generate 2.63 times more return on investment than Punjab National. However, KIOCL is 2.63 times more volatile than Punjab National Bank. It trades about 0.1 of its potential returns per unit of risk. Punjab National Bank is currently generating about 0.0 per unit of risk. If you would invest  34,290  in KIOCL Limited on October 7, 2024 and sell it today you would earn a total of  5,470  from holding KIOCL Limited or generate 15.95% return on investment over 90 days.

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

KIOCL Limited  vs.  Punjab National Bank

KIOCL Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

Punjab National Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Punjab National Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Punjab National is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KIOCL and Punjab National

The main advantage of trading using opposite KIOCL and Punjab National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KIOCL 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 KIOCL Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.