Correlation Between Punjab National and Future Retail

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

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

Diversification Opportunities for Punjab National and Future Retail

0.0

Correlation Coefficient

Punjab National  Future Retail

Pay attention - limited upside

The 3 months correlation between Punjab and Future is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Punjab National Bank and Future Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Retail Limited and Punjab National 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 Punjab National Bank are associated (or correlated) with Future Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Retail Limited has no effect on the direction of Punjab National i.e., Punjab National and Future Retail go up and down completely randomly.

Pair Corralation between Punjab National and Future Retail

Assuming the 90 days trading horizon Punjab National Bank is expected to generate 0.83 times more return on investment than Future Retail. However, Punjab National Bank is 1.21 times less risky than Future Retail. It trades about 0.07 of its potential returns per unit of risk. Future Retail Limited is currently generating about -0.02 per unit of risk. If you would invest  5,576  in Punjab National Bank on September 21, 2024 and sell it today you would earn a total of  4,776  from holding Punjab National Bank or generate 85.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	89.92%
Values	Daily Returns

Punjab National Bank  vs.  Future Retail Limited

Punjab National Bank

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Punjab National Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Punjab National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Future Retail Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Future Retail is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Punjab National and Future Retail

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

The idea behind Punjab National Bank and Future Retail Limited 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.