Correlation Between Life Insurance and Entertainment Network

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Can any of the company-specific risk be diversified away by investing in both Life Insurance and Entertainment Network 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 Entertainment Network into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Insurance and Entertainment Network Limited, you can compare the effects of market volatilities on Life Insurance and Entertainment Network 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 Entertainment Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and Entertainment Network.

Diversification Opportunities for Life Insurance and Entertainment Network

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Life and Entertainment is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and Entertainment Network Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entertainment Network 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 Entertainment Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entertainment Network has no effect on the direction of Life Insurance i.e., Life Insurance and Entertainment Network go up and down completely randomly.

Pair Corralation between Life Insurance and Entertainment Network

Assuming the 90 days trading horizon Life Insurance is expected to generate 0.72 times more return on investment than Entertainment Network. However, Life Insurance is 1.39 times less risky than Entertainment Network. It trades about 0.03 of its potential returns per unit of risk. Entertainment Network Limited is currently generating about -0.01 per unit of risk. If you would invest  83,086  in Life Insurance on October 6, 2024 and sell it today you would earn a total of  7,754  from holding Life Insurance or generate 9.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.18%
ValuesDaily Returns

Life Insurance  vs.  Entertainment Network Limited

 Performance 
       Timeline  
Life Insurance 

Risk-Adjusted Performance

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Weak
 
Strong
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 comparatively stable basic indicators, Life Insurance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Entertainment Network 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Entertainment Network Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

Life Insurance and Entertainment Network Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Life Insurance and Entertainment Network

The main advantage of trading using opposite Life Insurance and Entertainment Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Insurance position performs unexpectedly, Entertainment Network 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 Entertainment Network will offset losses from the drop in Entertainment Network's long position.
The idea behind Life Insurance and Entertainment Network 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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