Correlation Between Life InsuranceOf and Agro Tech

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

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

Diversification Opportunities for Life InsuranceOf and Agro Tech

0.73

Correlation Coefficient

Life InsuranceOf  Agro Tech

Poor diversification

The 3 months correlation between Life and Agro is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and Life InsuranceOf 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 Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of Life InsuranceOf i.e., Life InsuranceOf and Agro Tech go up and down completely randomly.

Pair Corralation between Life InsuranceOf and Agro Tech

Assuming the 90 days trading horizon Life Insurance is expected to generate 0.87 times more return on investment than Agro Tech. However, Life Insurance is 1.14 times less risky than Agro Tech. It trades about -0.11 of its potential returns per unit of risk. Agro Tech Foods is currently generating about -0.1 per unit of risk. If you would invest  88,700  in Life Insurance on December 27, 2024 and sell it today you would lose (10,015) from holding Life Insurance or give up 11.29% of portfolio value over 90 days.

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

Life Insurance  vs.  Agro Tech Foods

Life InsuranceOf

Risk-Adjusted Performance

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 inconsistent 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.

Agro Tech Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agro Tech Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Life InsuranceOf and Agro Tech

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

The idea behind Life Insurance and Agro Tech Foods 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.