Correlation Between General Insurance and Allied Blenders
Can any of the company-specific risk be diversified away by investing in both General Insurance and Allied Blenders 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 General Insurance and Allied Blenders into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Insurance and Allied Blenders Distillers, you can compare the effects of market volatilities on General Insurance and Allied Blenders 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 General Insurance with a short position of Allied Blenders. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Insurance and Allied Blenders.
Diversification Opportunities for General Insurance and Allied Blenders
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between General and Allied is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Allied Blenders Distillers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Blenders Dist and General Insurance 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 General Insurance are associated (or correlated) with Allied Blenders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Blenders Dist has no effect on the direction of General Insurance i.e., General Insurance and Allied Blenders go up and down completely randomly.
Pair Corralation between General Insurance and Allied Blenders
Assuming the 90 days trading horizon General Insurance is expected to generate 1.34 times less return on investment than Allied Blenders. In addition to that, General Insurance is 1.14 times more volatile than Allied Blenders Distillers. It trades about 0.04 of its total potential returns per unit of risk. Allied Blenders Distillers is currently generating about 0.07 per unit of volatility. If you would invest 31,790 in Allied Blenders Distillers on November 8, 2024 and sell it today you would earn a total of 7,415 from holding Allied Blenders Distillers or generate 23.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 62.04% |
| Values | Daily Returns |
General Insurance vs. Allied Blenders Distillers
Performance |
| Timeline |
| General Insurance |
| Allied Blenders Dist |
General Insurance and Allied Blenders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Insurance and Allied Blenders
The main advantage of trading using opposite General Insurance and Allied Blenders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Insurance position performs unexpectedly, Allied Blenders 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 Allied Blenders will offset losses from the drop in Allied Blenders' long position.| General Insurance vs. State Bank of | General Insurance vs. Reliance Industries Limited | General Insurance vs. HDFC Bank Limited | General Insurance vs. Tata Motors Limited |
| Allied Blenders vs. United Spirits Limited | Allied Blenders vs. Radico Khaitan Limited | Allied Blenders vs. Tilaknagar Industries Limited | Allied Blenders vs. Globus Spirits Limited |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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