Correlation Between Punjab National and KIOCL

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

Diversification Opportunities for Punjab National and KIOCL

0.37

Correlation Coefficient

Punjab National  KIOCL

Weak diversification

The 3 months correlation between Punjab and KIOCL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Punjab National Bank and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL 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 KIOCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIOCL Limited has no effect on the direction of Punjab National i.e., Punjab National and KIOCL go up and down completely randomly.

Pair Corralation between Punjab National and KIOCL

Assuming the 90 days trading horizon Punjab National is expected to generate 1.11 times less return on investment than KIOCL. But when comparing it to its historical volatility, Punjab National Bank is 1.76 times less risky than KIOCL. It trades about 0.08 of its potential returns per unit of risk. KIOCL Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20,430  in KIOCL Limited on October 24, 2024 and sell it today you would earn a total of  15,795  from holding KIOCL Limited or generate 77.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Punjab National Bank  vs.  KIOCL Limited

Punjab National Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Punjab National Bank are ranked lower than 1 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

KIOCL Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Punjab National and KIOCL

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

The idea behind Punjab National Bank and KIOCL 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.