Correlation Between REC and PB Fintech

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

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

Diversification Opportunities for REC and PB Fintech

0.21

Correlation Coefficient

REC  PB Fintech

Modest diversification

The 3 months correlation between REC and POLICYBZR is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding REC Limited and PB Fintech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PB Fintech Limited and REC 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 REC Limited are associated (or correlated) with PB Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PB Fintech Limited has no effect on the direction of REC i.e., REC and PB Fintech go up and down completely randomly.

Pair Corralation between REC and PB Fintech

Assuming the 90 days trading horizon REC is expected to generate 1.47 times less return on investment than PB Fintech. In addition to that, REC is 1.18 times more volatile than PB Fintech Limited. It trades about 0.09 of its total potential returns per unit of risk. PB Fintech Limited is currently generating about 0.15 per unit of volatility. If you would invest  74,785  in PB Fintech Limited on October 5, 2024 and sell it today you would earn a total of  146,800  from holding PB Fintech Limited or generate 196.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.67%
Values	Daily Returns

REC Limited  vs.  PB Fintech Limited

REC Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REC Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, REC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

PB Fintech Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PB Fintech Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, PB Fintech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REC and PB Fintech

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

The idea behind REC Limited and PB Fintech 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.