Correlation Between Reliance Insurance and Oil
Can any of the company-specific risk be diversified away by investing in both Reliance Insurance and Oil 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 Reliance Insurance and Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reliance Insurance Co and Oil and Gas, you can compare the effects of market volatilities on Reliance Insurance and Oil 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 Reliance Insurance with a short position of Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Insurance and Oil.
Diversification Opportunities for Reliance Insurance and Oil
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Reliance and Oil is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Insurance Co and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas and Reliance 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 Reliance Insurance Co are associated (or correlated) with Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Reliance Insurance i.e., Reliance Insurance and Oil go up and down completely randomly.
Pair Corralation between Reliance Insurance and Oil
Assuming the 90 days trading horizon Reliance Insurance Co is expected to generate 1.02 times more return on investment than Oil. However, Reliance Insurance is 1.02 times more volatile than Oil and Gas. It trades about 0.2 of its potential returns per unit of risk. Oil and Gas is currently generating about 0.14 per unit of risk. If you would invest 1,150 in Reliance Insurance Co on September 4, 2024 and sell it today you would earn a total of 123.00 from holding Reliance Insurance Co or generate 10.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.91% |
| Values | Daily Returns |
Reliance Insurance Co vs. Oil and Gas
Performance |
| Timeline |
| Reliance Insurance |
| Oil and Gas |
Reliance Insurance and Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Insurance and Oil
The main advantage of trading using opposite Reliance Insurance and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Insurance position performs unexpectedly, Oil 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 Oil will offset losses from the drop in Oil's long position.| Reliance Insurance vs. United Insurance | Reliance Insurance vs. Century Insurance | Reliance Insurance vs. Security Investment Bank | Reliance Insurance vs. Adamjee Insurance |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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