Correlation Between MRF and Life Insurance
Can any of the company-specific risk be diversified away by investing in both MRF and Life Insurance 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 MRF and Life Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MRF Limited and Life Insurance, you can compare the effects of market volatilities on MRF and Life Insurance 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 MRF with a short position of Life Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRF and Life Insurance.
Diversification Opportunities for MRF and Life Insurance
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MRF and Life is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and MRF 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 MRF Limited are associated (or correlated) with Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of MRF i.e., MRF and Life Insurance go up and down completely randomly.
Pair Corralation between MRF and Life Insurance
Assuming the 90 days trading horizon MRF is expected to generate 1.32 times less return on investment than Life Insurance. But when comparing it to its historical volatility, MRF Limited is 1.62 times less risky than Life Insurance. It trades about 0.05 of its potential returns per unit of risk. Life Insurance is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 57,029 in Life Insurance on November 19, 2024 and sell it today you would earn a total of 18,881 from holding Life Insurance or generate 33.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
MRF Limited vs. Life Insurance
Performance |
| Timeline |
| MRF Limited |
| Life Insurance |
MRF and Life Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MRF and Life Insurance
The main advantage of trading using opposite MRF and Life Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRF position performs unexpectedly, Life Insurance 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 Life Insurance will offset losses from the drop in Life Insurance's long position.| MRF vs. Sarveshwar Foods Limited | MRF vs. WESTLIFE FOODWORLD LIMITED | MRF vs. Hindustan Foods Limited | MRF vs. Iris Clothings Limited |
| Life Insurance vs. Compucom Software Limited | Life Insurance vs. ZF Commercial Vehicle | Life Insurance vs. Nucleus Software Exports | Life Insurance vs. Kaynes Technology India |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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