Correlation Between Bank of Punjab and Reliance Insurance
Can any of the company-specific risk be diversified away by investing in both Bank of Punjab and Reliance Insurance 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 Reliance Insurance 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 Reliance Insurance Co, you can compare the effects of market volatilities on Bank of Punjab and Reliance Insurance 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 Reliance Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and Reliance Insurance.
Diversification Opportunities for Bank of Punjab and Reliance Insurance
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Reliance is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and Reliance Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Insurance 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 Reliance Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Insurance has no effect on the direction of Bank of Punjab i.e., Bank of Punjab and Reliance Insurance go up and down completely randomly.
Pair Corralation between Bank of Punjab and Reliance Insurance
Assuming the 90 days trading horizon Bank of Punjab is expected to under-perform the Reliance Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Punjab is 1.83 times less risky than Reliance Insurance. The stock trades about -0.19 of its potential returns per unit of risk. The Reliance Insurance Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,190 in Reliance Insurance Co on November 4, 2024 and sell it today you would lose (63.00) from holding Reliance Insurance Co or give up 5.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Bank of Punjab vs. Reliance Insurance Co
Performance |
| Timeline |
| Bank of Punjab |
| Reliance Insurance |
Bank of Punjab and Reliance Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Punjab and Reliance Insurance
The main advantage of trading using opposite Bank of Punjab and Reliance Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab position performs unexpectedly, Reliance Insurance 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 Reliance Insurance will offset losses from the drop in Reliance Insurance's long position.| Bank of Punjab vs. Ghani Chemical Industries | Bank of Punjab vs. East West Insurance | Bank of Punjab vs. Shaheen Insurance | Bank of Punjab vs. First Fidelity Leasing |
| Reliance Insurance vs. Fateh Sports Wear | Reliance Insurance vs. Century Insurance | Reliance Insurance vs. WorldCall Telecom | Reliance Insurance vs. 786 Investment Limited |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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