Correlation Between Punjab National and MSP Steel
Can any of the company-specific risk be diversified away by investing in both Punjab National and MSP Steel 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 Punjab National and MSP Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Punjab National Bank and MSP Steel Power, you can compare the effects of market volatilities on Punjab National and MSP Steel 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 Punjab National with a short position of MSP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Punjab National and MSP Steel.
Diversification Opportunities for Punjab National and MSP Steel
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Punjab and MSP is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Punjab National Bank and MSP Steel Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Steel Power and Punjab National 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 Punjab National Bank are associated (or correlated) with MSP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Steel Power has no effect on the direction of Punjab National i.e., Punjab National and MSP Steel go up and down completely randomly.
Pair Corralation between Punjab National and MSP Steel
Assuming the 90 days trading horizon Punjab National Bank is expected to generate 0.73 times more return on investment than MSP Steel. However, Punjab National Bank is 1.36 times less risky than MSP Steel. It trades about -0.1 of its potential returns per unit of risk. MSP Steel Power is currently generating about -0.51 per unit of risk. If you would invest 10,176 in Punjab National Bank on October 29, 2024 and sell it today you would lose (440.00) from holding Punjab National Bank or give up 4.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Punjab National Bank vs. MSP Steel Power
Performance |
| Timeline |
| Punjab National Bank |
| MSP Steel Power |
Punjab National and MSP Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Punjab National and MSP Steel
The main advantage of trading using opposite Punjab National and MSP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Punjab National position performs unexpectedly, MSP Steel 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 MSP Steel will offset losses from the drop in MSP Steel's long position.| Punjab National vs. Sintex Plastics Technology | Punjab National vs. Cambridge Technology Enterprises | Punjab National vs. Indian Metals Ferro | Punjab National vs. ZF Commercial Vehicle |
| MSP Steel vs. MIRC Electronics Limited | MSP Steel vs. Styrenix Performance Materials | MSP Steel vs. Som Distilleries Breweries | MSP Steel vs. Consolidated Construction Consortium |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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