Correlation Between VA Tech and PNC Infratech

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

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

Diversification Opportunities for VA Tech and PNC Infratech

-0.3

Correlation Coefficient

VA Tech  PNC Infratech

Very good diversification

The 3 months correlation between WABAG and PNC is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and PNC Infratech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Infratech Limited and VA Tech 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 VA Tech Wabag are associated (or correlated) with PNC Infratech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Infratech Limited has no effect on the direction of VA Tech i.e., VA Tech and PNC Infratech go up and down completely randomly.

Pair Corralation between VA Tech and PNC Infratech

Assuming the 90 days trading horizon VA Tech Wabag is expected to generate 1.13 times more return on investment than PNC Infratech. However, VA Tech is 1.13 times more volatile than PNC Infratech Limited. It trades about 0.12 of its potential returns per unit of risk. PNC Infratech Limited is currently generating about 0.01 per unit of risk. If you would invest  32,185  in VA Tech Wabag on October 11, 2024 and sell it today you would earn a total of  121,920  from holding VA Tech Wabag or generate 378.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

VA Tech Wabag  vs.  PNC Infratech Limited

VA Tech Wabag

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days VA Tech Wabag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, VA Tech is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

PNC Infratech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PNC Infratech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with VA Tech and PNC Infratech

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

The idea behind VA Tech Wabag and PNC Infratech 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..