Correlation Between Punjab Sind and Kamat Hotels

Can any of the company-specific risk be diversified away by investing in both Punjab Sind and Kamat Hotels 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 Sind and Kamat Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Punjab Sind Bank and Kamat Hotels Limited, you can compare the effects of market volatilities on Punjab Sind and Kamat Hotels 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 Sind with a short position of Kamat Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Punjab Sind and Kamat Hotels.

Diversification Opportunities for Punjab Sind and Kamat Hotels

0.14

Correlation Coefficient

Punjab Sind  Kamat Hotels

Average diversification

The 3 months correlation between Punjab and Kamat is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Punjab Sind Bank and Kamat Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kamat Hotels Limited and Punjab Sind 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 Sind Bank are associated (or correlated) with Kamat Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kamat Hotels Limited has no effect on the direction of Punjab Sind i.e., Punjab Sind and Kamat Hotels go up and down completely randomly.

Pair Corralation between Punjab Sind and Kamat Hotels

Assuming the 90 days trading horizon Punjab Sind is expected to generate 4.69 times less return on investment than Kamat Hotels. But when comparing it to its historical volatility, Punjab Sind Bank is 1.18 times less risky than Kamat Hotels. It trades about 0.02 of its potential returns per unit of risk. Kamat Hotels Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  18,984  in Kamat Hotels Limited on October 23, 2024 and sell it today you would earn a total of  2,546  from holding Kamat Hotels Limited or generate 13.41% return on investment over 90 days.

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

Punjab Sind Bank  vs.  Kamat Hotels Limited

Punjab Sind Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Punjab Sind Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Punjab Sind is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Kamat Hotels Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kamat Hotels Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Kamat Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Punjab Sind and Kamat Hotels

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

The idea behind Punjab Sind Bank and Kamat Hotels 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.