Correlation Between Life Insurance and Spentex Industries

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

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

Diversification Opportunities for Life Insurance and Spentex Industries

0.0

Correlation Coefficient

Life Insurance  Spentex Industries

Pay attention - limited upside

The 3 months correlation between Life and Spentex is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and Spentex Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spentex Industries 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 Spentex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spentex Industries has no effect on the direction of Life Insurance i.e., Life Insurance and Spentex Industries go up and down completely randomly.

Pair Corralation between Life Insurance and Spentex Industries

Assuming the 90 days trading horizon Life Insurance is expected to generate 30.16 times less return on investment than Spentex Industries. But when comparing it to its historical volatility, Life Insurance is 23.79 times less risky than Spentex Industries. It trades about 0.04 of its potential returns per unit of risk. Spentex Industries Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Spentex Industries Limited on September 20, 2024 and sell it today you would earn a total of  27,825  from holding Spentex Industries Limited or generate 15900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	88.55%
Values	Daily Returns

Life Insurance  vs.  Spentex Industries Limited

Life Insurance

Risk-Adjusted Performance

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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 unfluctuating 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.

Spentex Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spentex Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Spentex Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Life Insurance and Spentex Industries

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

The idea behind Life Insurance and Spentex Industries 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.