Correlation Between SBI Insurance and APPLIED MATERIALS

Can any of the company-specific risk be diversified away by investing in both SBI Insurance and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS, you can compare the effects of market volatilities on SBI Insurance and APPLIED MATERIALS 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Insurance and APPLIED MATERIALS.

Diversification Opportunities for SBI Insurance and APPLIED MATERIALS

-0.66

Correlation Coefficient

SBI Insurance  APPLIED MATERIALS

Excellent diversification

The 3 months correlation between SBI and APPLIED is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding SBI Insurance Group and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of SBI Insurance i.e., SBI Insurance and APPLIED MATERIALS go up and down completely randomly.

Pair Corralation between SBI Insurance and APPLIED MATERIALS

Assuming the 90 days trading horizon SBI Insurance is expected to generate 2.32 times less return on investment than APPLIED MATERIALS. In addition to that, SBI Insurance is 1.22 times more volatile than APPLIED MATERIALS. It trades about 0.1 of its total potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.29 per unit of volatility. If you would invest  15,902  in APPLIED MATERIALS on October 11, 2024 and sell it today you would earn a total of  1,294  from holding APPLIED MATERIALS or generate 8.14% return on investment over 90 days.

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

SBI Insurance Group  vs.  APPLIED MATERIALS

SBI Insurance Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Insurance Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SBI Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

APPLIED MATERIALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APPLIED MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SBI Insurance and APPLIED MATERIALS

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

The idea behind SBI Insurance Group and APPLIED MATERIALS 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 Transaction History module to view history of all your transactions and understand their impact on performance.