Correlation Between IGI Life and Jubilee Life

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

Diversification Opportunities for IGI Life and Jubilee Life

0.88

Correlation Coefficient

IGI Life  Jubilee Life

Very poor diversification

The 3 months correlation between IGI and Jubilee is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding IGI Life Insurance and Jubilee Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilee Life Insurance 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 Jubilee Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilee Life Insurance has no effect on the direction of IGI Life i.e., IGI Life and Jubilee Life go up and down completely randomly.

Pair Corralation between IGI Life and Jubilee Life

Assuming the 90 days trading horizon IGI Life Insurance is expected to generate 1.4 times more return on investment than Jubilee Life. However, IGI Life is 1.4 times more volatile than Jubilee Life Insurance. It trades about -0.05 of its potential returns per unit of risk. Jubilee Life Insurance is currently generating about -0.08 per unit of risk. If you would invest  1,555  in IGI Life Insurance on October 12, 2024 and sell it today you would lose (64.00) from holding IGI Life Insurance or give up 4.12% of portfolio value over 90 days.

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

IGI Life Insurance  vs.  Jubilee Life Insurance

IGI Life Insurance

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IGI Life Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IGI Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Jubilee Life Insurance

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilee Life Insurance are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Jubilee Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IGI Life and Jubilee Life

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

The idea behind IGI Life Insurance and Jubilee Life Insurance 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.