Correlation Between SBI Insurance and DICKS Sporting

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

Diversification Opportunities for SBI Insurance and DICKS Sporting

0.78

Correlation Coefficient

SBI Insurance  DICKS Sporting

Poor diversification

The 3 months correlation between SBI and DICKS is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SBI Insurance Group and DICKS Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKS Sporting Goods 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 DICKS Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKS Sporting Goods has no effect on the direction of SBI Insurance i.e., SBI Insurance and DICKS Sporting go up and down completely randomly.

Pair Corralation between SBI Insurance and DICKS Sporting

Assuming the 90 days trading horizon SBI Insurance is expected to generate 1.04 times less return on investment than DICKS Sporting. But when comparing it to its historical volatility, SBI Insurance Group is 1.56 times less risky than DICKS Sporting. It trades about 0.15 of its potential returns per unit of risk. DICKS Sporting Goods is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  19,277  in DICKS Sporting Goods on October 5, 2024 and sell it today you would earn a total of  2,798  from holding DICKS Sporting Goods or generate 14.51% 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.  DICKS Sporting Goods

SBI Insurance Group

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days SBI Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

DICKS Sporting Goods

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days DICKS Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, DICKS Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Insurance and DICKS Sporting

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

The idea behind SBI Insurance Group and DICKS Sporting Goods 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.