Correlation Between Life Insurance and SIS
Can any of the company-specific risk be diversified away by investing in both Life Insurance and SIS 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 SIS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Insurance and SIS LIMITED, you can compare the effects of market volatilities on Life Insurance and SIS 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 SIS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and SIS.
Diversification Opportunities for Life Insurance and SIS
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Life and SIS is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and SIS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIS 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 SIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIS LIMITED has no effect on the direction of Life Insurance i.e., Life Insurance and SIS go up and down completely randomly.
Pair Corralation between Life Insurance and SIS
Assuming the 90 days trading horizon Life Insurance is expected to generate 1.27 times more return on investment than SIS. However, Life Insurance is 1.27 times more volatile than SIS LIMITED. It trades about 0.2 of its potential returns per unit of risk. SIS LIMITED is currently generating about -0.19 per unit of risk. If you would invest 92,305 in Life Insurance on September 1, 2024 and sell it today you would earn a total of 6,245 from holding Life Insurance or generate 6.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Life Insurance vs. SIS LIMITED
Performance |
| Timeline |
| Life Insurance |
| SIS LIMITED |
Life Insurance and SIS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Insurance and SIS
The main advantage of trading using opposite Life Insurance and SIS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Insurance position performs unexpectedly, SIS 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 SIS will offset losses from the drop in SIS's long position.| Life Insurance vs. Reliance Industries Limited | Life Insurance vs. Indian Oil | Life Insurance vs. Oil Natural Gas |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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