Correlation Between Poste Italiane and SBI Insurance

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

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

Diversification Opportunities for Poste Italiane and SBI Insurance

0.9

Correlation Coefficient

Poste Italiane  SBI Insurance

Almost no diversification

The 3 months correlation between Poste and SBI is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Poste Italiane SpA 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 Poste Italiane 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 Poste Italiane SpA 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 Poste Italiane i.e., Poste Italiane and SBI Insurance go up and down completely randomly.

Pair Corralation between Poste Italiane and SBI Insurance

Assuming the 90 days horizon Poste Italiane SpA is expected to generate 0.47 times more return on investment than SBI Insurance. However, Poste Italiane SpA is 2.11 times less risky than SBI Insurance. It trades about 0.31 of its potential returns per unit of risk. SBI Insurance Group is currently generating about 0.13 per unit of risk. If you would invest  1,304  in Poste Italiane SpA on October 26, 2024 and sell it today you would earn a total of  131.00  from holding Poste Italiane SpA or generate 10.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Poste Italiane SpA  vs.  SBI Insurance Group

Poste Italiane SpA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Poste Italiane SpA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Poste Italiane reported solid returns over the last few months and may actually be approaching a breakup point.

SBI Insurance Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Insurance Group are ranked lower than 14 (%) 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 Poste Italiane and SBI Insurance

The main advantage of trading using opposite Poste Italiane and SBI Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Poste Italiane 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 Poste Italiane SpA 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.