Correlation Between SBI Insurance and Controladora Vuela

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

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

Diversification Opportunities for SBI Insurance and Controladora Vuela

0.71

Correlation Coefficient

SBI Insurance  Controladora Vuela

Poor diversification

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

Pair Corralation between SBI Insurance and Controladora Vuela

Assuming the 90 days trading horizon SBI Insurance is expected to generate 2.21 times less return on investment than Controladora Vuela. But when comparing it to its historical volatility, SBI Insurance Group is 1.15 times less risky than Controladora Vuela. It trades about 0.13 of its potential returns per unit of risk. Controladora Vuela Compaa is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  550.00  in Controladora Vuela Compaa on October 4, 2024 and sell it today you would earn a total of  180.00  from holding Controladora Vuela Compaa or generate 32.73% return on investment over 90 days.

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

SBI Insurance Group  vs.  Controladora Vuela Compaa

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.

Controladora Vuela Compaa

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Controladora Vuela Compaa are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Controladora Vuela reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Insurance and Controladora Vuela

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

The idea behind SBI Insurance Group and Controladora Vuela Compaa 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.