Correlation Between Punjab Sind and Lemon Tree

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

Diversification Opportunities for Punjab Sind and Lemon Tree

0.83

Correlation Coefficient

Punjab Sind  Lemon Tree

Very poor diversification

The 3 months correlation between Punjab and Lemon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Punjab Sind Bank and Lemon Tree Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemon Tree Hotels 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 Lemon Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemon Tree Hotels has no effect on the direction of Punjab Sind i.e., Punjab Sind and Lemon Tree go up and down completely randomly.

Pair Corralation between Punjab Sind and Lemon Tree

Assuming the 90 days trading horizon Punjab Sind Bank is expected to generate 1.18 times more return on investment than Lemon Tree. However, Punjab Sind is 1.18 times more volatile than Lemon Tree Hotels. It trades about 0.0 of its potential returns per unit of risk. Lemon Tree Hotels is currently generating about -0.04 per unit of risk. If you would invest  4,803  in Punjab Sind Bank on December 25, 2024 and sell it today you would lose (129.00) from holding Punjab Sind Bank or give up 2.69% of portfolio value over 90 days.

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

Punjab Sind Bank  vs.  Lemon Tree Hotels

Punjab Sind Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Punjab Sind 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 Sind is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lemon Tree Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lemon Tree Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Punjab Sind and Lemon Tree

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

The idea behind Punjab Sind Bank and Lemon Tree Hotels 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.