Correlation Between Life Insurance and General Insurance
Can any of the company-specific risk be diversified away by investing in both Life Insurance and General 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 Life Insurance and General Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Insurance and General Insurance, you can compare the effects of market volatilities on Life Insurance and General 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 Life Insurance with a short position of General Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and General Insurance.
Diversification Opportunities for Life Insurance and General Insurance
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Life and General is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance 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 General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Life Insurance i.e., Life Insurance and General Insurance go up and down completely randomly.
Pair Corralation between Life Insurance and General Insurance
Assuming the 90 days trading horizon Life Insurance is expected to under-perform the General Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Life Insurance is 1.86 times less risky than General Insurance. The stock trades about -0.03 of its potential returns per unit of risk. The General Insurance is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 36,030 in General Insurance on August 29, 2024 and sell it today you would earn a total of 3,795 from holding General Insurance or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Insurance vs. General Insurance
Performance |
| Timeline |
| Life Insurance |
| General Insurance |
Life Insurance and General Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Insurance and General Insurance
The main advantage of trading using opposite Life Insurance and General Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Insurance position performs unexpectedly, General 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 General Insurance will offset losses from the drop in General Insurance's long position.| Life Insurance vs. Gangotri Textiles Limited | Life Insurance vs. Hemisphere Properties India | Life Insurance vs. Kingfa Science Technology | Life Insurance vs. Rico Auto Industries |
| General Insurance vs. Manaksia Coated Metals | General Insurance vs. Newgen Software Technologies | General Insurance vs. Indian Metals Ferro | General Insurance vs. Sonata Software 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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