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
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Indian and Life is 0.92. 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 1.68 times more return on investment than Life Insurance. However, Indian Railway is 1.68 times more volatile than Life Insurance. It trades about 0.11 of its potential returns per unit of risk. Life Insurance is currently generating about 0.04 per unit of risk. If you would invest 3,012 in Indian Railway Finance on August 30, 2024 and sell it today you would earn a total of 12,037 from holding Indian Railway Finance or generate 399.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| 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. Bigbloc Construction Limited | Indian Railway vs. Embassy Office Parks | Indian Railway vs. Tips Music Limited | Indian Railway vs. Syrma SGS Technology |
| Life Insurance vs. MRF Limited | Life Insurance vs. Nalwa Sons Investments | Life Insurance vs. Vardhman Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Stocks Directory Find actively traded stocks across global markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |