Correlation Between Indian Railway and Life Insurance
Can any of the company-specific risk be diversified away by investing in both Indian Railway and Life Insurance 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 Indian Railway and Life Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Railway Finance and Life Insurance, you can compare the effects of market volatilities on Indian Railway and Life Insurance 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 Indian Railway with a short position of Life Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Railway and Life Insurance.
Diversification Opportunities for Indian Railway and Life Insurance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Indian and Life is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Indian Railway Finance and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and Indian Railway 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 Indian Railway Finance are associated (or correlated) with Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of Indian Railway i.e., Indian Railway and Life Insurance go up and down completely randomly.
Pair Corralation between Indian Railway and Life Insurance
Assuming the 90 days trading horizon Indian Railway Finance is expected to generate 1.67 times more return on investment than Life Insurance. However, Indian Railway is 1.67 times more volatile than Life Insurance. It trades about 0.08 of its potential returns per unit of risk. Life Insurance is currently generating about -0.09 per unit of risk. If you would invest 14,542 in Indian Railway Finance on November 7, 2024 and sell it today you would earn a total of 552.00 from holding Indian Railway Finance or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indian Railway Finance vs. Life Insurance
Performance |
| Timeline |
| Indian Railway Finance |
| Life Insurance |
Indian Railway and Life Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Railway and Life Insurance
The main advantage of trading using opposite Indian Railway and Life Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Railway position performs unexpectedly, Life Insurance 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 Life Insurance will offset losses from the drop in Life Insurance's long position.| Indian Railway vs. Niraj Ispat Industries | Indian Railway vs. Syrma SGS Technology | Indian Railway vs. The Investment Trust | Indian Railway vs. Cholamandalam Investment and |
| Life Insurance vs. Iris Clothings Limited | Life Insurance vs. Future Retail Limited | Life Insurance vs. Baazar Style Retail | Life Insurance vs. Silgo Retail 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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