Correlation Between PTC India and Bank of Maharashtra

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

Diversification Opportunities for PTC India and Bank of Maharashtra

0.6

Correlation Coefficient

PTC India  Bank of Maharashtra

Poor diversification

The 3 months correlation between PTC and Bank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PTC India Financial and Bank of Maharashtra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Maharashtra 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 Bank of Maharashtra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Maharashtra has no effect on the direction of PTC India i.e., PTC India and Bank of Maharashtra go up and down completely randomly.

Pair Corralation between PTC India and Bank of Maharashtra

Assuming the 90 days trading horizon PTC India Financial is expected to generate 1.72 times more return on investment than Bank of Maharashtra. However, PTC India is 1.72 times more volatile than Bank of Maharashtra. It trades about -0.02 of its potential returns per unit of risk. Bank of Maharashtra is currently generating about -0.35 per unit of risk. 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

PTC India Financial  vs.  Bank of Maharashtra

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.

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.

Pair Trading with PTC India and Bank of Maharashtra

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

The idea behind PTC India Financial and Bank of Maharashtra 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.