Correlation Between ILFS Investment and General Insurance

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

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

Diversification Opportunities for ILFS Investment and General Insurance

0.08

Correlation Coefficient

ILFS Investment  General Insurance

Significant diversification

The 3 months correlation between ILFS and General is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ILFS Investment Managers and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and ILFS Investment 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 ILFS Investment Managers are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of ILFS Investment i.e., ILFS Investment and General Insurance go up and down completely randomly.

Pair Corralation between ILFS Investment and General Insurance

Assuming the 90 days trading horizon ILFS Investment is expected to generate 13.16 times less return on investment than General Insurance. But when comparing it to its historical volatility, ILFS Investment Managers is 1.15 times less risky than General Insurance. It trades about 0.01 of its potential returns per unit of risk. General Insurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  29,775  in General Insurance on October 8, 2024 and sell it today you would earn a total of  15,995  from holding General Insurance or generate 53.72% return on investment over 90 days.

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

ILFS Investment Managers  vs.  General Insurance

ILFS Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ILFS Investment Managers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ILFS Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

General Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ILFS Investment and General Insurance

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

The idea behind ILFS Investment Managers and General 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.