Correlation Between Life Insurance and Automotive Stampings
Can any of the company-specific risk be diversified away by investing in both Life Insurance and Automotive Stampings 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 Life Insurance and Automotive Stampings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Insurance and Automotive Stampings and, you can compare the effects of market volatilities on Life Insurance and Automotive Stampings 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 Life Insurance with a short position of Automotive Stampings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and Automotive Stampings.
Diversification Opportunities for Life Insurance and Automotive Stampings
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Life and Automotive is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and Automotive Stampings and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Stampings and and Life 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 Life Insurance are associated (or correlated) with Automotive Stampings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Stampings and has no effect on the direction of Life Insurance i.e., Life Insurance and Automotive Stampings go up and down completely randomly.
Pair Corralation between Life Insurance and Automotive Stampings
Assuming the 90 days trading horizon Life Insurance is expected to generate 2.9 times less return on investment than Automotive Stampings. But when comparing it to its historical volatility, Life Insurance is 1.68 times less risky than Automotive Stampings. It trades about 0.03 of its potential returns per unit of risk. Automotive Stampings and is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 35,990 in Automotive Stampings and on September 26, 2024 and sell it today you would earn a total of 32,410 from holding Automotive Stampings and or generate 90.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.59% |
| Values | Daily Returns |
Life Insurance vs. Automotive Stampings and
Performance |
| Timeline |
| Life Insurance |
| Automotive Stampings and |
Life Insurance and Automotive Stampings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Insurance and Automotive Stampings
The main advantage of trading using opposite Life Insurance and Automotive Stampings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Insurance position performs unexpectedly, Automotive Stampings 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 Automotive Stampings will offset losses from the drop in Automotive Stampings' long position.| Life Insurance vs. Reliance Industries Limited | Life Insurance vs. Oil Natural Gas | Life Insurance vs. ICICI Bank Limited | Life Insurance vs. Bharti Airtel Limited |
| Automotive Stampings vs. Reliance Industries Limited | Automotive Stampings vs. Life Insurance | Automotive Stampings vs. Indian Oil | Automotive Stampings vs. Oil Natural Gas |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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