Correlation Between S P and SBI Life

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

Diversification Opportunities for S P and SBI Life

-0.22
  Correlation Coefficient
 S P

Very good diversification

The 3 months correlation between SPAL and SBI is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding S P Apparels 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 S P 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 S P Apparels 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 S P i.e., S P and SBI Life go up and down completely randomly.

Pair Corralation between S P and SBI Life

Assuming the 90 days trading horizon S P Apparels is expected to under-perform the SBI Life. In addition to that, S P is 1.57 times more volatile than SBI Life Insurance. It trades about -0.13 of its total potential returns per unit of risk. SBI Life Insurance is currently generating about 0.14 per unit of volatility. If you would invest  138,700  in SBI Life Insurance on October 26, 2024 and sell it today you would earn a total of  6,285  from holding SBI Life Insurance or generate 4.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

S P Apparels  vs.  SBI Life Insurance

 Performance 
       Timeline  
S P Apparels 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days S P Apparels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, S P is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
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 weak 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.

S P and SBI Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with S P and SBI Life

The main advantage of trading using opposite S P and SBI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S P 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 S P Apparels 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 CEOs Directory module to screen CEOs from public companies around the world.

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