Correlation Between SBI Life and Reliance Industries

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

Diversification Opportunities for SBI Life and Reliance Industries

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between SBI and Reliance is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and SBI Life 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 SBI Life Insurance are associated (or correlated) with Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of SBI Life i.e., SBI Life and Reliance Industries go up and down completely randomly.

Pair Corralation between SBI Life and Reliance Industries

Assuming the 90 days trading horizon SBI Life Insurance is expected to generate 1.19 times more return on investment than Reliance Industries. However, SBI Life is 1.19 times more volatile than Reliance Industries Limited. It trades about 0.14 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about 0.06 per unit of risk. If you would invest  139,040  in SBI Life Insurance on November 1, 2024 and sell it today you would earn a total of  7,050  from holding SBI Life Insurance or generate 5.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

SBI Life Insurance  vs.  Reliance Industries Limited

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -15-10-50
JavaScript chart by amCharts 3.21.15SBILIFE RELIANCE
       Timeline  
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 latest unfluctuating performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1,4001,4501,5001,5501,6001,650
Reliance Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1,2001,2201,2401,2601,2801,3001,3201,340

SBI Life and Reliance Industries Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.56-1.93-1.3-0.67-0.05330.521.111.72.292.88 0.050.100.150.20
JavaScript chart by amCharts 3.21.15SBILIFE RELIANCE
       Returns  

Pair Trading with SBI Life and Reliance Industries

The main advantage of trading using opposite SBI Life and Reliance Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI Life position performs unexpectedly, Reliance Industries 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 Reliance Industries will offset losses from the drop in Reliance Industries' long position.
The idea behind SBI Life Insurance and Reliance Industries Limited 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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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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