Correlation Between Punjab Sind and Raj Rayon

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

Diversification Opportunities for Punjab Sind and Raj Rayon

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Punjab and Raj is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Punjab Sind Bank and Raj Rayon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raj Rayon Industries and Punjab Sind 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 Sind Bank are associated (or correlated) with Raj Rayon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raj Rayon Industries has no effect on the direction of Punjab Sind i.e., Punjab Sind and Raj Rayon go up and down completely randomly.

Pair Corralation between Punjab Sind and Raj Rayon

Assuming the 90 days trading horizon Punjab Sind Bank is expected to under-perform the Raj Rayon. In addition to that, Punjab Sind is 1.24 times more volatile than Raj Rayon Industries. It trades about -0.07 of its total potential returns per unit of risk. Raj Rayon Industries is currently generating about -0.01 per unit of volatility. If you would invest  2,250  in Raj Rayon Industries on September 1, 2024 and sell it today you would lose (20.00) from holding Raj Rayon Industries or give up 0.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Punjab Sind Bank  vs.  Raj Rayon Industries

 Performance 
       Timeline  
Punjab Sind Bank 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Punjab Sind Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Raj Rayon Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Raj Rayon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Punjab Sind and Raj Rayon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Punjab Sind and Raj Rayon

The main advantage of trading using opposite Punjab Sind and Raj Rayon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Punjab Sind position performs unexpectedly, Raj Rayon 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 Raj Rayon will offset losses from the drop in Raj Rayon's long position.
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The idea behind Punjab Sind Bank and Raj Rayon Industries 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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