Correlation Between IGI Life and NetSol Technologies

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

Diversification Opportunities for IGI Life and NetSol Technologies

-0.15

Correlation Coefficient

IGI Life  NetSol Technologies

Good diversification

The 3 months correlation between IGI and NetSol is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding IGI Life Insurance and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of IGI Life i.e., IGI Life and NetSol Technologies go up and down completely randomly.

Pair Corralation between IGI Life and NetSol Technologies

Assuming the 90 days trading horizon IGI Life Insurance is expected to generate 2.36 times more return on investment than NetSol Technologies. However, IGI Life is 2.36 times more volatile than NetSol Technologies. It trades about 0.08 of its potential returns per unit of risk. NetSol Technologies is currently generating about -0.05 per unit of risk. If you would invest  1,473  in IGI Life Insurance on December 22, 2024 and sell it today you would earn a total of  220.00  from holding IGI Life Insurance or generate 14.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.87%
Values	Daily Returns

IGI Life Insurance  vs.  NetSol Technologies

IGI Life Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IGI Life Insurance are ranked lower than 6 (%) 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.

NetSol Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days NetSol Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with IGI Life and NetSol Technologies

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

The idea behind IGI Life Insurance and NetSol Technologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.