Correlation Between TVS Electronics and Punjab National

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

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

Diversification Opportunities for TVS Electronics and Punjab National

0.1

Correlation Coefficient

TVS Electronics  Punjab National

Average diversification

The 3 months correlation between TVS and Punjab is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding TVS Electronics Limited 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 TVS Electronics 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 TVS Electronics Limited 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 TVS Electronics i.e., TVS Electronics and Punjab National go up and down completely randomly.

Pair Corralation between TVS Electronics and Punjab National

Assuming the 90 days trading horizon TVS Electronics Limited is expected to generate 1.88 times more return on investment than Punjab National. However, TVS Electronics is 1.88 times more volatile than Punjab National Bank. It trades about 0.09 of its potential returns per unit of risk. Punjab National Bank is currently generating about -0.17 per unit of risk. If you would invest  36,580  in TVS Electronics Limited on October 10, 2024 and sell it today you would earn a total of  1,780  from holding TVS Electronics Limited or generate 4.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

TVS Electronics Limited  vs.  Punjab National Bank

TVS Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TVS Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, TVS Electronics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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

Pair Trading with TVS Electronics and Punjab National

The main advantage of trading using opposite TVS Electronics and Punjab National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TVS Electronics 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 TVS Electronics Limited 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.