Correlation Between Bank of Maharashtra and Punjab Sind

Can any of the company-specific risk be diversified away by investing in both Bank of Maharashtra 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 Bank of Maharashtra and Punjab Sind 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 Punjab Sind Bank, you can compare the effects of market volatilities on Bank of Maharashtra 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 Bank of Maharashtra with a short position of Punjab Sind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Maharashtra and Punjab Sind.

Diversification Opportunities for Bank of Maharashtra and Punjab Sind

0.68

Correlation Coefficient

Bank of Maharashtra  Punjab Sind

Poor diversification

The 3 months correlation between Bank and Punjab is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Maharashtra 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 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 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 Bank of Maharashtra i.e., Bank of Maharashtra and Punjab Sind go up and down completely randomly.

Pair Corralation between Bank of Maharashtra and Punjab Sind

Assuming the 90 days trading horizon Bank of Maharashtra is expected to under-perform the Punjab Sind. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Maharashtra is 1.15 times less risky than Punjab Sind. The stock trades about -0.05 of its potential returns per unit of risk. The Punjab Sind Bank is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,813  in Punjab Sind Bank on December 24, 2024 and sell it today you would lose (470.00) from holding Punjab Sind Bank or give up 9.77% 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.  Punjab Sind Bank

Bank of Maharashtra

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Punjab Sind Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Punjab Sind Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Bank of Maharashtra and Punjab Sind

The main advantage of trading using opposite Bank of Maharashtra and Punjab Sind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Maharashtra 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 Bank of Maharashtra 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.