Correlation Between SBI Life and Varun Beverages

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

Diversification Opportunities for SBI Life and Varun Beverages

-0.74
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between SBI and Varun is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Varun Beverages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varun Beverages 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 Varun Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varun Beverages has no effect on the direction of SBI Life i.e., SBI Life and Varun Beverages go up and down completely randomly.

Pair Corralation between SBI Life and Varun Beverages

Assuming the 90 days trading horizon SBI Life Insurance is expected to generate 0.79 times more return on investment than Varun Beverages. However, SBI Life Insurance is 1.26 times less risky than Varun Beverages. It trades about 0.04 of its potential returns per unit of risk. Varun Beverages Limited is currently generating about -0.18 per unit of risk. If you would invest  145,615  in SBI Life Insurance on October 12, 2024 and sell it today you would earn a total of  1,230  from holding SBI Life Insurance or generate 0.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

SBI Life Insurance  vs.  Varun Beverages Limited

 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 unfluctuating 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.
Varun Beverages 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SBI Life and Varun Beverages Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SBI Life and Varun Beverages

The main advantage of trading using opposite SBI Life and Varun Beverages positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI Life position performs unexpectedly, Varun Beverages 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 Varun Beverages will offset losses from the drop in Varun Beverages' long position.
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The idea behind SBI Life Insurance and Varun Beverages 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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