Correlation Between Life Insurance and MRF
Can any of the company-specific risk be diversified away by investing in both Life Insurance and MRF 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 MRF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Insurance and MRF Limited, you can compare the effects of market volatilities on Life Insurance and MRF 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 MRF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and MRF.
Diversification Opportunities for Life Insurance and MRF
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Life and MRF is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF 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 MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of Life Insurance i.e., Life Insurance and MRF go up and down completely randomly.
Pair Corralation between Life Insurance and MRF
Assuming the 90 days trading horizon Life Insurance is expected to under-perform the MRF. In addition to that, Life Insurance is 1.0 times more volatile than MRF Limited. It trades about -0.09 of its total potential returns per unit of risk. MRF Limited is currently generating about 0.02 per unit of volatility. If you would invest 12,412,800 in MRF Limited on August 25, 2024 and sell it today you would earn a total of 46,900 from holding MRF Limited or generate 0.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Insurance vs. MRF Limited
Performance |
| Timeline |
| Life Insurance |
| MRF Limited |
Life Insurance and MRF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Insurance and MRF
The main advantage of trading using opposite Life Insurance and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Insurance position performs unexpectedly, MRF 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 MRF will offset losses from the drop in MRF's long position.| Life Insurance vs. MRF Limited | Life Insurance vs. Honeywell Automation India | Life Insurance vs. Divis Laboratories Limited | Life Insurance vs. Indo Borax Chemicals |
| MRF vs. Styrenix Performance Materials | MRF vs. Privi Speciality Chemicals | MRF vs. Elgi Rubber | MRF vs. V2 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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