Correlation Between Punjab National and Tree House

Can any of the company-specific risk be diversified away by investing in both Punjab National and Tree House 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 Tree House 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 Tree House Education, you can compare the effects of market volatilities on Punjab National and Tree House 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 Tree House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Punjab National and Tree House.

Diversification Opportunities for Punjab National and Tree House

0.26

Correlation Coefficient

Punjab National  Tree House

Modest diversification

The 3 months correlation between Punjab and Tree is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Punjab National Bank and Tree House Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree House Education 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 Tree House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree House Education has no effect on the direction of Punjab National i.e., Punjab National and Tree House go up and down completely randomly.

Pair Corralation between Punjab National and Tree House

Assuming the 90 days trading horizon Punjab National Bank is expected to generate 0.78 times more return on investment than Tree House. However, Punjab National Bank is 1.29 times less risky than Tree House. It trades about -0.03 of its potential returns per unit of risk. Tree House Education is currently generating about -0.05 per unit of risk. If you would invest  10,721  in Punjab National Bank on September 30, 2024 and sell it today you would lose (577.00) from holding Punjab National Bank or give up 5.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Punjab National Bank  vs.  Tree House Education

Punjab National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Punjab National Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Punjab National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tree House Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tree House Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Punjab National and Tree House

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

The idea behind Punjab National Bank and Tree House Education 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.