Correlation Between IOL Chemicals and Life Insurance

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

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

Diversification Opportunities for IOL Chemicals and Life Insurance

0.33

Correlation Coefficient

IOL Chemicals  Life Insurance

Weak diversification

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

Pair Corralation between IOL Chemicals and Life Insurance

Assuming the 90 days trading horizon IOL Chemicals is expected to generate 5.04 times less return on investment than Life Insurance. In addition to that, IOL Chemicals is 1.09 times more volatile than Life Insurance. It trades about 0.0 of its total potential returns per unit of risk. Life Insurance is currently generating about 0.02 per unit of volatility. If you would invest  84,691  in Life Insurance on October 9, 2024 and sell it today you would earn a total of  2,949  from holding Life Insurance or generate 3.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.18%
Values	Daily Returns

IOL Chemicals and  vs.  Life Insurance

IOL Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IOL Chemicals and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, IOL Chemicals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with IOL Chemicals and Life Insurance

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

The idea behind IOL Chemicals and and 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.