Correlation Between Tata Consultancy and Punjab Sind

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

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

Diversification Opportunities for Tata Consultancy and Punjab Sind

0.84

Correlation Coefficient

Tata Consultancy  Punjab Sind

Very poor diversification

The 3 months correlation between Tata and Punjab is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Tata Consultancy Services and Punjab Sind Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Punjab Sind Bank and Tata Consultancy 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 Tata Consultancy Services are associated (or correlated) with Punjab Sind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Punjab Sind Bank has no effect on the direction of Tata Consultancy i.e., Tata Consultancy and Punjab Sind go up and down completely randomly.

Pair Corralation between Tata Consultancy and Punjab Sind

Assuming the 90 days trading horizon Tata Consultancy Services is expected to under-perform the Punjab Sind. But the stock apears to be less risky and, when comparing its historical volatility, Tata Consultancy Services is 2.32 times less risky than Punjab Sind. The stock trades about -0.13 of its potential returns per unit of risk. The Punjab Sind Bank is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,723  in Punjab Sind Bank on December 29, 2024 and sell it today you would lose (365.00) from holding Punjab Sind Bank or give up 7.73% of portfolio value over 90 days.

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

Tata Consultancy Services  vs.  Punjab Sind Bank

Tata Consultancy Services

Risk-Adjusted Performance

Very Weak

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

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tata Consultancy and Punjab Sind

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

The idea behind Tata Consultancy Services and Punjab Sind 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.