Correlation Between Punjab National and Vodafone Idea

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

Diversification Opportunities for Punjab National and Vodafone Idea

0.17

Correlation Coefficient

Punjab National  Vodafone Idea

Average diversification

The 3 months correlation between Punjab and Vodafone is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Punjab National Bank and Vodafone Idea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Idea 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 Vodafone Idea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Idea Limited has no effect on the direction of Punjab National i.e., Punjab National and Vodafone Idea go up and down completely randomly.

Pair Corralation between Punjab National and Vodafone Idea

Assuming the 90 days trading horizon Punjab National Bank is expected to generate 0.57 times more return on investment than Vodafone Idea. However, Punjab National Bank is 1.76 times less risky than Vodafone Idea. It trades about -0.05 of its potential returns per unit of risk. Vodafone Idea Limited is currently generating about -0.1 per unit of risk. If you would invest  11,655  in Punjab National Bank on October 22, 2024 and sell it today you would lose (1,642) from holding Punjab National Bank or give up 14.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Punjab National Bank  vs.  Vodafone Idea Limited

Punjab National Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Punjab National Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Punjab National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vodafone Idea Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Idea Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vodafone Idea may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Punjab National and Vodafone Idea

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

The idea behind Punjab National Bank and Vodafone Idea 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.