Correlation Between IGI Life and Amreli Steels

Can any of the company-specific risk be diversified away by investing in both IGI Life and Amreli Steels 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 IGI Life and Amreli Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IGI Life Insurance and Amreli Steels, you can compare the effects of market volatilities on IGI Life and Amreli Steels 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 IGI Life with a short position of Amreli Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGI Life and Amreli Steels.

Diversification Opportunities for IGI Life and Amreli Steels

0.73

Correlation Coefficient

IGI Life  Amreli Steels

Poor diversification

The 3 months correlation between IGI and Amreli is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding IGI Life Insurance and Amreli Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amreli Steels and IGI Life 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 IGI Life Insurance are associated (or correlated) with Amreli Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amreli Steels has no effect on the direction of IGI Life i.e., IGI Life and Amreli Steels go up and down completely randomly.

Pair Corralation between IGI Life and Amreli Steels

Assuming the 90 days trading horizon IGI Life is expected to generate 11.18 times less return on investment than Amreli Steels. In addition to that, IGI Life is 1.06 times more volatile than Amreli Steels. It trades about 0.01 of its total potential returns per unit of risk. Amreli Steels is currently generating about 0.17 per unit of volatility. If you would invest  1,865  in Amreli Steels on October 25, 2024 and sell it today you would earn a total of  621.00  from holding Amreli Steels or generate 33.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.55%
Values	Daily Returns

IGI Life Insurance  vs.  Amreli Steels

IGI Life Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IGI Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IGI Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amreli Steels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amreli Steels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Amreli Steels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IGI Life and Amreli Steels

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

The idea behind IGI Life Insurance and Amreli Steels 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.