Correlation Between Life Insurance and 3M India

Can any of the company-specific risk be diversified away by investing in both Life Insurance and 3M India 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 Life Insurance and 3M India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Life Insurance and 3M India Limited, you can compare the effects of market volatilities on Life Insurance and 3M India 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 Life Insurance with a short position of 3M India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and 3M India.

Diversification Opportunities for Life Insurance and 3M India

0.29

Correlation Coefficient

Life Insurance  3M India

Modest diversification

The 3 months correlation between Life and 3MINDIA is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and 3M India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M India Limited and Life Insurance 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 Life Insurance are associated (or correlated) with 3M India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M India Limited has no effect on the direction of Life Insurance i.e., Life Insurance and 3M India go up and down completely randomly.

Pair Corralation between Life Insurance and 3M India

Assuming the 90 days trading horizon Life Insurance is expected to generate 1.26 times less return on investment than 3M India. In addition to that, Life Insurance is 1.09 times more volatile than 3M India Limited. It trades about 0.03 of its total potential returns per unit of risk. 3M India Limited is currently generating about 0.04 per unit of volatility. If you would invest  2,228,275  in 3M India Limited on October 12, 2024 and sell it today you would earn a total of  741,120  from holding 3M India Limited or generate 33.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Life Insurance  vs.  3M India Limited

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

3M India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3M India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Life Insurance and 3M India

The main advantage of trading using opposite Life Insurance and 3M India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Insurance position performs unexpectedly, 3M India 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 3M India will offset losses from the drop in 3M India's long position.

The idea behind Life Insurance and 3M India Limited 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 Commodity Directory module to find actively traded commodities issued by global exchanges.