Correlation Between Maharashtra Scooters and SBI Life

Can any of the company-specific risk be diversified away by investing in both Maharashtra Scooters and SBI Life 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 SBI Life 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 SBI Life Insurance, you can compare the effects of market volatilities on Maharashtra Scooters and SBI Life 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 SBI Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maharashtra Scooters and SBI Life.

Diversification Opportunities for Maharashtra Scooters and SBI Life

0.49

Correlation Coefficient

Maharashtra Scooters  SBI Life

Very weak diversification

The 3 months correlation between Maharashtra and SBI is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Maharashtra Scooters Limited and SBI Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI 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 SBI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Life Insurance has no effect on the direction of Maharashtra Scooters i.e., Maharashtra Scooters and SBI Life go up and down completely randomly.

Pair Corralation between Maharashtra Scooters and SBI Life

Assuming the 90 days trading horizon Maharashtra Scooters Limited is expected to generate 1.59 times more return on investment than SBI Life. However, Maharashtra Scooters is 1.59 times more volatile than SBI Life Insurance. It trades about 0.11 of its potential returns per unit of risk. SBI Life Insurance is currently generating about 0.11 per unit of risk. If you would invest  967,720  in Maharashtra Scooters Limited on December 28, 2024 and sell it today you would earn a total of  154,730  from holding Maharashtra Scooters Limited or generate 15.99% return on investment over 90 days.

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

Maharashtra Scooters Limited  vs.  SBI Life Insurance

Maharashtra Scooters

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maharashtra Scooters Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Maharashtra Scooters displayed solid returns over the last few months and may actually be approaching a breakup point.

SBI Life Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Life Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, SBI Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Maharashtra Scooters and SBI Life

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

The idea behind Maharashtra Scooters Limited and SBI 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.