Correlation Between Bank of Maharashtra and PTC India

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

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

Diversification Opportunities for Bank of Maharashtra and PTC India

0.6

Correlation Coefficient

Bank of Maharashtra  PTC India

Poor diversification

The 3 months correlation between Bank and PTC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Maharashtra 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 Bank of Maharashtra 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 Bank of Maharashtra 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 Bank of Maharashtra i.e., Bank of Maharashtra and PTC India go up and down completely randomly.

Pair Corralation between Bank of Maharashtra and PTC India

Assuming the 90 days trading horizon Bank of Maharashtra is expected to under-perform the PTC India. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Maharashtra is 1.72 times less risky than PTC India. The stock trades about -0.35 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bank of Maharashtra  vs.  PTC India Financial

Bank of Maharashtra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Maharashtra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bank of Maharashtra is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 Bank of Maharashtra and PTC India

The main advantage of trading using opposite Bank of Maharashtra and PTC India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Maharashtra 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 Bank of Maharashtra 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.