Correlation Between Punjab National and MIRC Electronics

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

Diversification Opportunities for Punjab National and MIRC Electronics

0.95

Correlation Coefficient

Punjab National  MIRC Electronics

Almost no diversification

The 3 months correlation between Punjab and MIRC is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Punjab National Bank and MIRC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIRC Electronics 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 MIRC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIRC Electronics has no effect on the direction of Punjab National i.e., Punjab National and MIRC Electronics go up and down completely randomly.

Pair Corralation between Punjab National and MIRC Electronics

Assuming the 90 days trading horizon Punjab National Bank is expected to generate 0.51 times more return on investment than MIRC Electronics. However, Punjab National Bank is 1.97 times less risky than MIRC Electronics. It trades about -0.06 of its potential returns per unit of risk. MIRC Electronics Limited is currently generating about -0.21 per unit of risk. If you would invest  10,164  in Punjab National Bank on December 24, 2024 and sell it today you would lose (850.00) from holding Punjab National Bank or give up 8.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Punjab National Bank  vs.  MIRC Electronics Limited

Punjab National Bank

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

MIRC Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days MIRC Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Punjab National and MIRC Electronics

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

The idea behind Punjab National Bank and MIRC Electronics 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.