Correlation Between Maharashtra Scooters and Life Insurance

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

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

Diversification Opportunities for Maharashtra Scooters and Life Insurance

0.16

Correlation Coefficient

Maharashtra Scooters  Life Insurance

Average diversification

The 3 months correlation between Maharashtra and Life is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Maharashtra Scooters Limited and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and Maharashtra Scooters 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 Maharashtra Scooters Limited are associated (or correlated) with Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of Maharashtra Scooters i.e., Maharashtra Scooters and Life Insurance go up and down completely randomly.

Pair Corralation between Maharashtra Scooters and Life Insurance

Assuming the 90 days trading horizon Maharashtra Scooters Limited is expected to generate 1.9 times more return on investment than Life Insurance. However, Maharashtra Scooters is 1.9 times more volatile than Life Insurance. It trades about 0.0 of its potential returns per unit of risk. Life Insurance is currently generating about -0.09 per unit of risk. If you would invest  982,625  in Maharashtra Scooters Limited on September 5, 2024 and sell it today you would lose (32,585) from holding Maharashtra Scooters Limited or give up 3.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Maharashtra Scooters Limited  vs.  Life Insurance

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Maharashtra Scooters and Life Insurance

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

The idea behind Maharashtra Scooters Limited and Life Insurance 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.