Correlation Between Northland Power and SBI Insurance

Can any of the company-specific risk be diversified away by investing in both Northland Power and SBI Insurance 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 Northland Power and SBI Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northland Power and SBI Insurance Group, you can compare the effects of market volatilities on Northland Power and SBI Insurance 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 Northland Power with a short position of SBI Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and SBI Insurance.

Diversification Opportunities for Northland Power and SBI Insurance

-0.71

Correlation Coefficient

Northland Power  SBI Insurance

Pay attention - limited upside

The 3 months correlation between Northland and SBI is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and SBI Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Insurance Group and Northland Power 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 Northland Power are associated (or correlated) with SBI Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Insurance Group has no effect on the direction of Northland Power i.e., Northland Power and SBI Insurance go up and down completely randomly.

Pair Corralation between Northland Power and SBI Insurance

Assuming the 90 days horizon Northland Power is expected to under-perform the SBI Insurance. In addition to that, Northland Power is 1.48 times more volatile than SBI Insurance Group. It trades about -0.03 of its total potential returns per unit of risk. SBI Insurance Group is currently generating about 0.0 per unit of volatility. If you would invest  720.00  in SBI Insurance Group on October 4, 2024 and sell it today you would lose (80.00) from holding SBI Insurance Group or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Northland Power  vs.  SBI Insurance Group

Northland Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northland Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SBI Insurance Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Insurance Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SBI Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northland Power and SBI Insurance

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

The idea behind Northland Power and SBI Insurance Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.