Correlation Between Punjab Chemicals and Embassy Office

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

By analyzing existing cross correlation between Punjab Chemicals Crop and Embassy Office Parks, you can compare the effects of market volatilities on Punjab Chemicals and Embassy Office 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 Chemicals with a short position of Embassy Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Punjab Chemicals and Embassy Office.

Diversification Opportunities for Punjab Chemicals and Embassy Office

0.57

Correlation Coefficient

Punjab Chemicals  Embassy Office

Very weak diversification

The 3 months correlation between Punjab and Embassy is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Punjab Chemicals Crop and Embassy Office Parks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Office Parks and Punjab Chemicals 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 Chemicals Crop are associated (or correlated) with Embassy Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Office Parks has no effect on the direction of Punjab Chemicals i.e., Punjab Chemicals and Embassy Office go up and down completely randomly.

Pair Corralation between Punjab Chemicals and Embassy Office

Assuming the 90 days trading horizon Punjab Chemicals Crop is expected to generate 2.12 times more return on investment than Embassy Office. However, Punjab Chemicals is 2.12 times more volatile than Embassy Office Parks. It trades about -0.06 of its potential returns per unit of risk. Embassy Office Parks is currently generating about -0.12 per unit of risk. If you would invest  120,375  in Punjab Chemicals Crop on September 24, 2024 and sell it today you would lose (13,245) from holding Punjab Chemicals Crop or give up 11.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Punjab Chemicals Crop  vs.  Embassy Office Parks

Punjab Chemicals Crop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Punjab Chemicals Crop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Punjab Chemicals and Embassy Office

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

The idea behind Punjab Chemicals Crop and Embassy Office Parks 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.