Correlation Between Punjab National and WESTLIFE FOODWORLD

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

Diversification Opportunities for Punjab National and WESTLIFE FOODWORLD

0.2

Correlation Coefficient

Punjab National  WESTLIFE FOODWORLD

Modest diversification

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

Pair Corralation between Punjab National and WESTLIFE FOODWORLD

Assuming the 90 days trading horizon Punjab National Bank is expected to generate 1.15 times more return on investment than WESTLIFE FOODWORLD. However, Punjab National is 1.15 times more volatile than WESTLIFE FOODWORLD LIMITED. It trades about 0.07 of its potential returns per unit of risk. WESTLIFE FOODWORLD LIMITED is currently generating about 0.02 per unit of risk. If you would invest  5,542  in Punjab National Bank on October 4, 2024 and sell it today you would earn a total of  5,006  from holding Punjab National Bank or generate 90.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Punjab National Bank  vs.  WESTLIFE FOODWORLD LIMITED

Punjab National Bank

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, Punjab National is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

WESTLIFE FOODWORLD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTLIFE FOODWORLD LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Punjab National and WESTLIFE FOODWORLD

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

The idea behind Punjab National Bank and WESTLIFE FOODWORLD 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.