Correlation Between PNC Infratech and Speciality Restaurants

Can any of the company-specific risk be diversified away by investing in both PNC Infratech and Speciality Restaurants 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 PNC Infratech and Speciality Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PNC Infratech Limited and Speciality Restaurants Limited, you can compare the effects of market volatilities on PNC Infratech and Speciality Restaurants 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 PNC Infratech with a short position of Speciality Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Infratech and Speciality Restaurants.

Diversification Opportunities for PNC Infratech and Speciality Restaurants

0.69

Correlation Coefficient

PNC Infratech  Speciality Restaurants

Poor diversification

The 3 months correlation between PNC and Speciality is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PNC Infratech Limited and Speciality Restaurants Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Speciality Restaurants and PNC Infratech 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 PNC Infratech Limited are associated (or correlated) with Speciality Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Speciality Restaurants has no effect on the direction of PNC Infratech i.e., PNC Infratech and Speciality Restaurants go up and down completely randomly.

Pair Corralation between PNC Infratech and Speciality Restaurants

Assuming the 90 days trading horizon PNC Infratech Limited is expected to generate 2.72 times more return on investment than Speciality Restaurants. However, PNC Infratech is 2.72 times more volatile than Speciality Restaurants Limited. It trades about 0.12 of its potential returns per unit of risk. Speciality Restaurants Limited is currently generating about -0.17 per unit of risk. If you would invest  28,585  in PNC Infratech Limited on September 26, 2024 and sell it today you would earn a total of  2,225  from holding PNC Infratech Limited or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PNC Infratech Limited  vs.  Speciality Restaurants Limited

PNC Infratech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PNC Infratech and Speciality Restaurants

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

The idea behind PNC Infratech Limited and Speciality Restaurants 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.