Correlation Between Bank of Punjab and 1 Year

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Can any of the company-specific risk be diversified away by investing in both Bank of Punjab and 1 Year 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 Bank of Punjab and 1 Year into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Punjab and 1 Year GIS, you can compare the effects of market volatilities on Bank of Punjab and 1 Year 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 Bank of Punjab with a short position of 1 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and 1 Year.

Diversification Opportunities for Bank of Punjab and 1 Year

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Bank and P01GIS090525 is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and 1 Year GIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1 Year GIS and Bank of Punjab 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 Bank of Punjab are associated (or correlated) with 1 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1 Year GIS has no effect on the direction of Bank of Punjab i.e., Bank of Punjab and 1 Year go up and down completely randomly.

Pair Corralation between Bank of Punjab and 1 Year

Assuming the 90 days trading horizon Bank of Punjab is expected to generate 69.19 times more return on investment than 1 Year. However, Bank of Punjab is 69.19 times more volatile than 1 Year GIS. It trades about 0.49 of its potential returns per unit of risk. 1 Year GIS is currently generating about 1.46 per unit of risk. If you would invest  564.00  in Bank of Punjab on September 4, 2024 and sell it today you would earn a total of  337.00  from holding Bank of Punjab or generate 59.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy90.91%
ValuesDaily Returns

Bank of Punjab  vs.  1 Year GIS

 Performance 
       Timeline  
Bank of Punjab 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Punjab are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank of Punjab reported solid returns over the last few months and may actually be approaching a breakup point.
1 Year GIS 

Risk-Adjusted Performance

90 of 100

 
Weak
 
Strong
Market Crasher
Compared to the overall equity markets, risk-adjusted returns on investments in 1 Year GIS are ranked lower than 90 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 1 Year may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank of Punjab and 1 Year Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of Punjab and 1 Year

The main advantage of trading using opposite Bank of Punjab and 1 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab position performs unexpectedly, 1 Year 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 1 Year will offset losses from the drop in 1 Year's long position.
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The idea behind Bank of Punjab and 1 Year GIS 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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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 Global Correlations module to find global opportunities by holding instruments from different markets.

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