Correlation Between SBI Life and Investment Trust

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Can any of the company-specific risk be diversified away by investing in both SBI Life and Investment Trust 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 Investment Trust 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 The Investment Trust, you can compare the effects of market volatilities on SBI Life and Investment Trust 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 Investment Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Life and Investment Trust.

Diversification Opportunities for SBI Life and Investment Trust

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between SBI and Investment is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust 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 Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of SBI Life i.e., SBI Life and Investment Trust go up and down completely randomly.

Pair Corralation between SBI Life and Investment Trust

Assuming the 90 days trading horizon SBI Life Insurance is expected to generate 0.7 times more return on investment than Investment Trust. However, SBI Life Insurance is 1.43 times less risky than Investment Trust. It trades about -0.01 of its potential returns per unit of risk. The Investment Trust is currently generating about -0.22 per unit of risk. If you would invest  143,775  in SBI Life Insurance on October 30, 2024 and sell it today you would lose (1,335) from holding SBI Life Insurance or give up 0.93% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy97.56%
ValuesDaily Returns

SBI Life Insurance  vs.  The Investment Trust

 Performance 
       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 abnormal 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.
Investment Trust 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Investment Trust 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 and Investment Trust Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SBI Life and Investment Trust

The main advantage of trading using opposite SBI Life and Investment Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI Life position performs unexpectedly, Investment Trust 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 Investment Trust will offset losses from the drop in Investment Trust's long position.
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The idea behind SBI Life Insurance and The Investment Trust 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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