Correlation Between Life Insurance and United Breweries
Can any of the company-specific risk be diversified away by investing in both Life Insurance and United Breweries 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 United Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Insurance and United Breweries Limited, you can compare the effects of market volatilities on Life Insurance and United Breweries 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 United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and United Breweries.
Diversification Opportunities for Life Insurance and United Breweries
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Life and United is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries 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 United Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Breweries has no effect on the direction of Life Insurance i.e., Life Insurance and United Breweries go up and down completely randomly.
Pair Corralation between Life Insurance and United Breweries
Assuming the 90 days trading horizon Life Insurance is expected to generate 1.51 times more return on investment than United Breweries. However, Life Insurance is 1.51 times more volatile than United Breweries Limited. It trades about 0.06 of its potential returns per unit of risk. United Breweries Limited is currently generating about 0.06 per unit of risk. If you would invest 64,613 in Life Insurance on September 12, 2024 and sell it today you would earn a total of 30,207 from holding Life Insurance or generate 46.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.38% |
| Values | Daily Returns |
Life Insurance vs. United Breweries Limited
Performance |
| Timeline |
| Life Insurance |
| United Breweries |
Life Insurance and United Breweries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Insurance and United Breweries
The main advantage of trading using opposite Life Insurance and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Insurance position performs unexpectedly, United Breweries 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 United Breweries will offset losses from the drop in United Breweries' long position.| Life Insurance vs. Yes Bank Limited | Life Insurance vs. Indian Oil | Life Insurance vs. Indo Borax Chemicals | Life Insurance vs. Kingfa Science Technology |
| United Breweries vs. Life Insurance | United Breweries vs. Associated Alcohols Breweries | United Breweries vs. Orient Technologies Limited | United Breweries vs. Som Distilleries Breweries |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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