Correlation Between PTC India and Federal Bank

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

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

Diversification Opportunities for PTC India and Federal Bank

-0.32

Correlation Coefficient

PTC India  Federal Bank

Very good diversification

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

Pair Corralation between PTC India and Federal Bank

Assuming the 90 days trading horizon PTC India Financial is expected to generate 2.19 times more return on investment than Federal Bank. However, PTC India is 2.19 times more volatile than The Federal Bank. It trades about 0.07 of its potential returns per unit of risk. The Federal Bank is currently generating about 0.06 per unit of risk. If you would invest  1,620  in PTC India Financial on October 5, 2024 and sell it today you would earn a total of  2,703  from holding PTC India Financial or generate 166.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

PTC India Financial  vs.  The Federal Bank

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.

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.

Pair Trading with PTC India and Federal Bank

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

The idea behind PTC India Financial and The Federal 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.