Correlation Between CNB and PSB Holdings

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

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

Diversification Opportunities for CNB and PSB Holdings

-0.84

Correlation Coefficient

CNB  PSB Holdings

Pay attention - limited upside

The 3 months correlation between CNB and PSB is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding CNB Corp. and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings and CNB 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 CNB Corporation are associated (or correlated) with PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of CNB i.e., CNB and PSB Holdings go up and down completely randomly.

Pair Corralation between CNB and PSB Holdings

Given the investment horizon of 90 days CNB Corporation is expected to under-perform the PSB Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, CNB Corporation is 1.8 times less risky than PSB Holdings. The pink sheet trades about -0.25 of its potential returns per unit of risk. The PSB Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,492  in PSB Holdings on September 1, 2024 and sell it today you would earn a total of  298.00  from holding PSB Holdings or generate 11.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CNB Corp.  vs.  PSB Holdings

CNB Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNB Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

PSB Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PSB Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, PSB Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CNB and PSB Holdings

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

The idea behind CNB Corporation and PSB Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.