Correlation Between Punjab National and Spencers Retail

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

Diversification Opportunities for Punjab National and Spencers Retail

0.9

Correlation Coefficient

Punjab National  Spencers Retail

Almost no diversification

The 3 months correlation between Punjab and Spencers is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Punjab National Bank and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail 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 Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of Punjab National i.e., Punjab National and Spencers Retail go up and down completely randomly.

Pair Corralation between Punjab National and Spencers Retail

Assuming the 90 days trading horizon Punjab National Bank is expected to generate 0.51 times more return on investment than Spencers Retail. However, Punjab National Bank is 1.94 times less risky than Spencers Retail. It trades about -0.05 of its potential returns per unit of risk. Spencers Retail Limited is currently generating about -0.07 per unit of risk. If you would invest  10,164  in Punjab National Bank on December 25, 2024 and sell it today you would lose (783.00) from holding Punjab National Bank or give up 7.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.77%
Values	Daily Returns

Punjab National Bank  vs.  Spencers Retail 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 weak 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.

Spencers Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Punjab National and Spencers Retail

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

The idea behind Punjab National Bank and Spencers 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.