Correlation Between SAL Steel and SBI Life

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Can any of the company-specific risk be diversified away by investing in both SAL Steel and SBI Life 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 SAL Steel and SBI Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAL Steel Limited and SBI Life Insurance, you can compare the effects of market volatilities on SAL Steel 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 SAL Steel with a short position of SBI Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAL Steel and SBI Life.

Diversification Opportunities for SAL Steel and SBI Life

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between SAL and SBI is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited 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 SAL Steel 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 SAL Steel Limited 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 SAL Steel i.e., SAL Steel and SBI Life go up and down completely randomly.

Pair Corralation between SAL Steel and SBI Life

Assuming the 90 days trading horizon SAL Steel is expected to generate 1.03 times less return on investment than SBI Life. In addition to that, SAL Steel is 2.18 times more volatile than SBI Life Insurance. It trades about 0.01 of its total potential returns per unit of risk. SBI Life Insurance is currently generating about 0.03 per unit of volatility. If you would invest  125,225  in SBI Life Insurance on October 16, 2024 and sell it today you would earn a total of  21,515  from holding SBI Life Insurance or generate 17.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

SAL Steel Limited  vs.  SBI Life Insurance

 Performance 
       Timeline  
SAL Steel Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SAL Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
SBI Life Insurance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SBI Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SAL Steel and SBI Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SAL Steel and SBI Life

The main advantage of trading using opposite SAL Steel and SBI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAL Steel 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.
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The idea behind SAL Steel Limited 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.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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