Correlation Between General Insurance and Indian Railway
Can any of the company-specific risk be diversified away by investing in both General Insurance and Indian Railway 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 Indian Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Insurance and Indian Railway Finance, you can compare the effects of market volatilities on General Insurance and Indian Railway 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 Indian Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Insurance and Indian Railway.
Diversification Opportunities for General Insurance and Indian Railway
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between General and Indian is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Indian Railway Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Railway Finance 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 Indian Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Railway Finance has no effect on the direction of General Insurance i.e., General Insurance and Indian Railway go up and down completely randomly.
Pair Corralation between General Insurance and Indian Railway
Assuming the 90 days trading horizon General Insurance is expected to generate 0.96 times more return on investment than Indian Railway. However, General Insurance is 1.04 times less risky than Indian Railway. It trades about 0.09 of its potential returns per unit of risk. Indian Railway Finance is currently generating about 0.08 per unit of risk. If you would invest 21,757 in General Insurance on September 26, 2024 and sell it today you would earn a total of 25,133 from holding General Insurance or generate 115.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.34% |
| Values | Daily Returns |
General Insurance vs. Indian Railway Finance
Performance |
| Timeline |
| General Insurance |
| Indian Railway Finance |
General Insurance and Indian Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Insurance and Indian Railway
The main advantage of trading using opposite General Insurance and Indian Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Insurance position performs unexpectedly, Indian Railway 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 Indian Railway will offset losses from the drop in Indian Railway's long position.| General Insurance vs. Reliance Industries Limited | General Insurance vs. State Bank of | General Insurance vs. Oil Natural Gas | General Insurance vs. ICICI Bank Limited |
| Indian Railway vs. Action Construction Equipment | Indian Railway vs. Hindustan Construction | Indian Railway vs. Zee Entertainment Enterprises | Indian Railway vs. General Insurance |
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 Stocks Directory module to find actively traded stocks across global markets.
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