Correlation Between Mari Petroleum and Reliance Insurance

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

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

Diversification Opportunities for Mari Petroleum and Reliance Insurance

0.4

Correlation Coefficient

Mari Petroleum  Reliance Insurance

Very weak diversification

The 3 months correlation between Mari and Reliance is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Mari Petroleum and Reliance Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Insurance and Mari Petroleum 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 Mari Petroleum are associated (or correlated) with Reliance Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Insurance has no effect on the direction of Mari Petroleum i.e., Mari Petroleum and Reliance Insurance go up and down completely randomly.

Pair Corralation between Mari Petroleum and Reliance Insurance

Assuming the 90 days trading horizon Mari Petroleum is expected to under-perform the Reliance Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Mari Petroleum is 1.19 times less risky than Reliance Insurance. The stock trades about -0.01 of its potential returns per unit of risk. The Reliance Insurance Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,227  in Reliance Insurance Co on December 30, 2024 and sell it today you would lose (11.00) from holding Reliance Insurance Co or give up 0.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.89%
Values	Daily Returns

Mari Petroleum  vs.  Reliance Insurance Co

Mari Petroleum

Risk-Adjusted Performance

Very Weak

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

Reliance Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Insurance Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Reliance Insurance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mari Petroleum and Reliance Insurance

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

The idea behind Mari Petroleum and Reliance Insurance Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.