Correlation Between PB Fintech and HCL Technologies

Can any of the company-specific risk be diversified away by investing in both PB Fintech and HCL Technologies 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 PB Fintech and HCL Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for PB Fintech and HCL Technologies

0.73

Correlation Coefficient

PB Fintech  HCL Technologies

Poor diversification

The 3 months correlation between POLICYBZR and HCL is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PB Fintech Limited and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies and PB Fintech 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 PB Fintech Limited are associated (or correlated) with HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of PB Fintech i.e., PB Fintech and HCL Technologies go up and down completely randomly.

Pair Corralation between PB Fintech and HCL Technologies

Assuming the 90 days trading horizon PB Fintech Limited is expected to generate 1.62 times more return on investment than HCL Technologies. However, PB Fintech is 1.62 times more volatile than HCL Technologies Limited. It trades about 0.03 of its potential returns per unit of risk. HCL Technologies Limited is currently generating about -0.02 per unit of risk. If you would invest  166,185  in PB Fintech Limited on October 26, 2024 and sell it today you would earn a total of  3,285  from holding PB Fintech Limited or generate 1.98% return on investment over 90 days.

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

PB Fintech Limited  vs.  HCL Technologies Limited

PB Fintech Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PB Fintech Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, PB Fintech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

HCL Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCL Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, HCL Technologies is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with PB Fintech and HCL Technologies

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

The idea behind PB Fintech Limited and HCL Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.