By analyzing existing cross correlation between PUNJAB COMMUNICATIONS LTD and DOW, you can compare the effects of market volatilities on PUNJAB COMMUNICATIONS and DOW 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 COMMUNICATIONS with a short position of DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of PUNJAB COMMUNICATIONS and DOW.

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Can any of the company-specific risk be diversified away by investing in both PUNJAB COMMUNICATIONS and DOW 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 COMMUNICATIONS and DOW into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for PUNJAB COMMUNICATIONS and DOW

  Correlation Coefficient

Weak diversification

The 3 months correlation between PUNJAB and DOW is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding PUNJAB COMMUNICATIONS LTD and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and PUNJAB COMMUNICATIONS 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 COMMUNICATIONS LTD are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of PUNJAB COMMUNICATIONS i.e. PUNJAB COMMUNICATIONS and DOW go up and down completely randomly.

Pair Corralation between PUNJAB COMMUNICATIONS and DOW

Assuming the 30 trading days horizon, PUNJAB COMMUNICATIONS LTD is expected to generate 2.18 times more return on investment than DOW. However, PUNJAB COMMUNICATIONS is 2.18 times more volatile than DOW. It trades about 0.2 of its potential returns per unit of risk. DOW is currently generating about 0.1 per unit of risk. If you would invest  1,030  in PUNJAB COMMUNICATIONS LTD on June 7, 2020 and sell it today you would earn a total of  465.00  from holding PUNJAB COMMUNICATIONS LTD or generate 45.15% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns


 Performance (%) 
 Predicted Return Density 
Check out your portfolio center. Please also try Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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