Correlation Between Shipping and SBI Life

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

Diversification Opportunities for Shipping and SBI Life

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shipping and SBI is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shipping 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 Shipping 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 Shipping 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 Shipping i.e., Shipping and SBI Life go up and down completely randomly.

Pair Corralation between Shipping and SBI Life

Assuming the 90 days trading horizon Shipping is expected to generate 2.38 times more return on investment than SBI Life. However, Shipping is 2.38 times more volatile than SBI Life Insurance. It trades about 0.09 of its potential returns per unit of risk. SBI Life Insurance is currently generating about 0.03 per unit of risk. If you would invest  9,773  in Shipping on September 12, 2024 and sell it today you would earn a total of  14,019  from holding Shipping or generate 143.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shipping  vs.  SBI Life Insurance

 Performance 
       Timeline  
Shipping 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Shipping is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the 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 conflicting performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shipping and SBI Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shipping and SBI Life

The main advantage of trading using opposite Shipping and SBI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shipping 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 Shipping 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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