Correlation Between Punjab Sind and PVR INOX

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

Diversification Opportunities for Punjab Sind and PVR INOX

0.56

Correlation Coefficient

Punjab Sind  PVR INOX

Very weak diversification

The 3 months correlation between Punjab and PVR is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Punjab Sind Bank and PVR INOX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVR INOX 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 PVR INOX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVR INOX has no effect on the direction of Punjab Sind i.e., Punjab Sind and PVR INOX go up and down completely randomly.

Pair Corralation between Punjab Sind and PVR INOX

Assuming the 90 days trading horizon Punjab Sind Bank is expected to under-perform the PVR INOX. In addition to that, Punjab Sind is 1.17 times more volatile than PVR INOX. It trades about -0.1 of its total potential returns per unit of risk. PVR INOX is currently generating about 0.03 per unit of volatility. If you would invest  152,710  in PVR INOX on September 4, 2024 and sell it today you would earn a total of  4,540  from holding PVR INOX or generate 2.97% return on investment over 90 days.

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

Punjab Sind Bank  vs.  PVR INOX

Punjab Sind Bank

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PVR INOX

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PVR INOX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PVR INOX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Punjab Sind and PVR INOX

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

The idea behind Punjab Sind Bank and PVR INOX 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.