Correlation Between Rico Auto and Punjab National

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

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

Diversification Opportunities for Rico Auto and Punjab National

0.2

Correlation Coefficient

Rico Auto  Punjab National

Modest diversification

The 3 months correlation between Rico and Punjab is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Punjab National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Punjab National Bank and Rico Auto 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 Rico Auto Industries are associated (or correlated) with Punjab National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Punjab National Bank has no effect on the direction of Rico Auto i.e., Rico Auto and Punjab National go up and down completely randomly.

Pair Corralation between Rico Auto and Punjab National

Assuming the 90 days trading horizon Rico Auto is expected to generate 2.24 times less return on investment than Punjab National. In addition to that, Rico Auto is 1.46 times more volatile than Punjab National Bank. It trades about 0.02 of its total potential returns per unit of risk. Punjab National Bank is currently generating about 0.07 per unit of volatility. If you would invest  5,537  in Punjab National Bank on September 26, 2024 and sell it today you would earn a total of  4,627  from holding Punjab National Bank or generate 83.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.38%
Values	Daily Returns

Rico Auto Industries  vs.  Punjab National Bank

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Punjab National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rico Auto and Punjab National

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

The idea behind Rico Auto Industries and Punjab National Bank 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.