Correlation Between Life Insurance and ITI
Can any of the company-specific risk be diversified away by investing in both Life Insurance and ITI 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 ITI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Insurance and ITI Limited, you can compare the effects of market volatilities on Life Insurance and ITI 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 ITI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and ITI.
Diversification Opportunities for Life Insurance and ITI
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Life and ITI is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI Limited 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 ITI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITI Limited has no effect on the direction of Life Insurance i.e., Life Insurance and ITI go up and down completely randomly.
Pair Corralation between Life Insurance and ITI
Assuming the 90 days trading horizon Life Insurance is expected to generate 3.88 times less return on investment than ITI. But when comparing it to its historical volatility, Life Insurance is 1.84 times less risky than ITI. It trades about 0.04 of its potential returns per unit of risk. ITI Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 10,225 in ITI Limited on September 14, 2024 and sell it today you would earn a total of 26,320 from holding ITI Limited or generate 257.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.39% |
| Values | Daily Returns |
Life Insurance vs. ITI Limited
Performance |
| Timeline |
| Life Insurance |
| ITI Limited |
Life Insurance and ITI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Insurance and ITI
The main advantage of trading using opposite Life Insurance and ITI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Insurance position performs unexpectedly, ITI 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 ITI will offset losses from the drop in ITI's long position.| Life Insurance vs. Vodafone Idea Limited | Life Insurance vs. Yes Bank Limited | Life Insurance vs. Indian Overseas Bank | Life Insurance vs. Indian Oil |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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