Correlation Between SBI Insurance and Natural Health

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

Diversification Opportunities for SBI Insurance and Natural Health

0.69

Correlation Coefficient

SBI Insurance  Natural Health

Poor diversification

The 3 months correlation between SBI and Natural is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SBI Insurance Group and Natural Health Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Health Trends 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 Natural Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Health Trends has no effect on the direction of SBI Insurance i.e., SBI Insurance and Natural Health go up and down completely randomly.

Pair Corralation between SBI Insurance and Natural Health

Assuming the 90 days trading horizon SBI Insurance is expected to generate 1.48 times less return on investment than Natural Health. But when comparing it to its historical volatility, SBI Insurance Group is 1.92 times less risky than Natural Health. It trades about 0.14 of its potential returns per unit of risk. Natural Health Trends is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  390.00  in Natural Health Trends on December 27, 2024 and sell it today you would earn a total of  74.00  from holding Natural Health Trends or generate 18.97% 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.  Natural Health Trends

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.

Natural Health Trends

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Health Trends are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Natural Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Insurance and Natural Health

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

The idea behind SBI Insurance Group and Natural Health Trends 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.