Correlation Between Punjab National and Gangotri Textiles

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

Diversification Opportunities for Punjab National and Gangotri Textiles

0.2

Correlation Coefficient

Punjab National  Gangotri Textiles

Modest diversification

The 3 months correlation between Punjab and Gangotri is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Punjab National Bank and Gangotri Textiles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gangotri Textiles 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 Gangotri Textiles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gangotri Textiles has no effect on the direction of Punjab National i.e., Punjab National and Gangotri Textiles go up and down completely randomly.

Pair Corralation between Punjab National and Gangotri Textiles

Assuming the 90 days trading horizon Punjab National Bank is expected to generate 0.94 times more return on investment than Gangotri Textiles. However, Punjab National Bank is 1.07 times less risky than Gangotri Textiles. It trades about 0.0 of its potential returns per unit of risk. Gangotri Textiles Limited is currently generating about -0.01 per unit of risk. If you would invest  10,698  in Punjab National Bank on October 7, 2024 and sell it today you would lose (58.00) from holding Punjab National Bank or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Punjab National Bank  vs.  Gangotri Textiles Limited

Punjab National Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Punjab National Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Punjab National is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gangotri Textiles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gangotri Textiles Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Gangotri Textiles is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Punjab National and Gangotri Textiles

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

The idea behind Punjab National Bank and Gangotri Textiles 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.