Correlation Between Power FinanceLimited and SBI Life
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By analyzing existing cross correlation between Power Finance and SBI Life Insurance, you can compare the effects of market volatilities on Power FinanceLimited and SBI Life 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 Power FinanceLimited with a short position of SBI Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power FinanceLimited and SBI Life.
Diversification Opportunities for Power FinanceLimited and SBI Life
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Power and SBI is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and SBI Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Life Insurance and Power FinanceLimited 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 Power Finance are associated (or correlated) with SBI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Life Insurance has no effect on the direction of Power FinanceLimited i.e., Power FinanceLimited and SBI Life go up and down completely randomly.
Pair Corralation between Power FinanceLimited and SBI Life
Assuming the 90 days trading horizon Power Finance is expected to generate 2.57 times more return on investment than SBI Life. However, Power FinanceLimited is 2.57 times more volatile than SBI Life Insurance. It trades about 0.11 of its potential returns per unit of risk. SBI Life Insurance is currently generating about 0.03 per unit of risk. If you would invest 10,326 in Power Finance on August 30, 2024 and sell it today you would earn a total of 38,784 from holding Power Finance or generate 375.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Finance vs. SBI Life Insurance
Performance |
| Timeline |
| Power FinanceLimited |
| SBI Life Insurance |
Power FinanceLimited and SBI Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power FinanceLimited and SBI Life
The main advantage of trading using opposite Power FinanceLimited and SBI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power FinanceLimited position performs unexpectedly, SBI Life 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 SBI Life will offset losses from the drop in SBI Life's long position.The idea behind Power Finance and SBI Life Insurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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