Correlation Between Life InsuranceOf and S P
Can any of the company-specific risk be diversified away by investing in both Life InsuranceOf and S P 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 InsuranceOf and S P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Insurance and S P Apparels, you can compare the effects of market volatilities on Life InsuranceOf and S P 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 InsuranceOf with a short position of S P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life InsuranceOf and S P.
Diversification Opportunities for Life InsuranceOf and S P
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Life and SPAL is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and S P Apparels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P Apparels and Life InsuranceOf 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 S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P Apparels has no effect on the direction of Life InsuranceOf i.e., Life InsuranceOf and S P go up and down completely randomly.
Pair Corralation between Life InsuranceOf and S P
Assuming the 90 days trading horizon Life Insurance is expected to generate 0.3 times more return on investment than S P. However, Life Insurance is 3.38 times less risky than S P. It trades about -0.34 of its potential returns per unit of risk. S P Apparels is currently generating about -0.11 per unit of risk. If you would invest 82,490 in Life Insurance on December 1, 2024 and sell it today you would lose (8,440) from holding Life Insurance or give up 10.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Insurance vs. S P Apparels
Performance |
| Timeline |
| Life InsuranceOf |
| S P Apparels |
Life InsuranceOf and S P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life InsuranceOf and S P
The main advantage of trading using opposite Life InsuranceOf and S P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life InsuranceOf position performs unexpectedly, S P 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 S P will offset losses from the drop in S P's long position.| Life InsuranceOf vs. UltraTech Cement Limited | Life InsuranceOf vs. VA Tech Wabag | Life InsuranceOf vs. Golden Tobacco Limited | Life InsuranceOf vs. General Insurance |
| S P vs. Syrma SGS Technology | S P vs. NRB Industrial Bearings | S P vs. Hindustan Copper Limited | S P vs. Tera 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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