Correlation Between Life Insurance and Patanjali Foods

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

By analyzing existing cross correlation between Life Insurance and Patanjali Foods Limited, you can compare the effects of market volatilities on Life Insurance and Patanjali Foods 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 Patanjali Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and Patanjali Foods.

Diversification Opportunities for Life Insurance and Patanjali Foods

-0.07

Correlation Coefficient

Life Insurance  Patanjali Foods

Good diversification

The 3 months correlation between Life and Patanjali is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods 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 Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of Life Insurance i.e., Life Insurance and Patanjali Foods go up and down completely randomly.

Pair Corralation between Life Insurance and Patanjali Foods

Assuming the 90 days trading horizon Life Insurance is expected to under-perform the Patanjali Foods. But the stock apears to be less risky and, when comparing its historical volatility, Life Insurance is 1.27 times less risky than Patanjali Foods. The stock trades about -0.09 of its potential returns per unit of risk. The Patanjali Foods Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  184,287  in Patanjali Foods Limited on September 17, 2024 and sell it today you would lose (2,407) from holding Patanjali Foods Limited or give up 1.31% of portfolio value over 90 days.

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

Life Insurance  vs.  Patanjali Foods 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 latest unsteady 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.

Patanjali Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patanjali Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Life Insurance and Patanjali Foods

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

The idea behind Life Insurance and Patanjali Foods 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.