Correlation Between SBI Insurance and Iberdrola

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

Diversification Opportunities for SBI Insurance and Iberdrola

0.33

Correlation Coefficient

SBI Insurance  Iberdrola

Weak diversification

The 3 months correlation between SBI and Iberdrola is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SBI Insurance Group and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA 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 Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of SBI Insurance i.e., SBI Insurance and Iberdrola go up and down completely randomly.

Pair Corralation between SBI Insurance and Iberdrola

Assuming the 90 days trading horizon SBI Insurance Group is expected to generate 1.44 times more return on investment than Iberdrola. However, SBI Insurance is 1.44 times more volatile than Iberdrola SA. It trades about 0.15 of its potential returns per unit of risk. Iberdrola SA is currently generating about 0.18 per unit of risk. If you would invest  605.00  in SBI Insurance Group on December 21, 2024 and sell it today you would earn a total of  85.00  from holding SBI Insurance Group or generate 14.05% return on investment over 90 days.

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

SBI Insurance Group  vs.  Iberdrola SA

SBI Insurance Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Insurance Group are ranked lower than 11 (%) 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.

Iberdrola SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iberdrola SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Iberdrola reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Insurance and Iberdrola

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

The idea behind SBI Insurance Group and Iberdrola SA 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.