Correlation Between Provident Financial and SBI Insurance
Can any of the company-specific risk be diversified away by investing in both Provident Financial and SBI 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 Provident Financial and SBI Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Financial Services and SBI Insurance Group, you can compare the effects of market volatilities on Provident Financial and SBI 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 Provident Financial with a short position of SBI Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Financial and SBI Insurance.
Diversification Opportunities for Provident Financial and SBI Insurance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Provident and SBI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services and SBI Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Insurance Group and Provident Financial 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 Provident Financial Services are associated (or correlated) with SBI Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Insurance Group has no effect on the direction of Provident Financial i.e., Provident Financial and SBI Insurance go up and down completely randomly.
Pair Corralation between Provident Financial and SBI Insurance
Assuming the 90 days horizon Provident Financial Services is expected to generate 1.56 times more return on investment than SBI Insurance. However, Provident Financial is 1.56 times more volatile than SBI Insurance Group. It trades about 0.16 of its potential returns per unit of risk. SBI Insurance Group is currently generating about 0.12 per unit of risk. If you would invest 1,571 in Provident Financial Services on September 12, 2024 and sell it today you would earn a total of 389.00 from holding Provident Financial Services or generate 24.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Provident Financial Services vs. SBI Insurance Group
Performance |
| Timeline |
| Provident Financial |
| SBI Insurance Group |
Provident Financial and SBI Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Provident Financial and SBI Insurance
The main advantage of trading using opposite Provident Financial and SBI Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial position performs unexpectedly, SBI 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 SBI Insurance will offset losses from the drop in SBI Insurance's long position.| Provident Financial vs. BW OFFSHORE LTD | Provident Financial vs. Zijin Mining Group | Provident Financial vs. BOSTON BEER A | Provident Financial vs. THAI BEVERAGE |
| SBI Insurance vs. Apple Inc | SBI Insurance vs. Apple Inc | SBI Insurance vs. Apple Inc | SBI Insurance vs. Apple Inc |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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