Correlation Between Power Finance and SBI Life

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

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

Diversification Opportunities for Power Finance and SBI Life

-0.35

Correlation Coefficient

Power Finance  SBI Life

Very good diversification

The 3 months correlation between Power and SBI is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance 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 Power Finance 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 Power Finance 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 Power Finance i.e., Power Finance and SBI Life go up and down completely randomly.

Pair Corralation between Power Finance and SBI Life

Assuming the 90 days trading horizon Power Finance is expected to under-perform the SBI Life. In addition to that, Power Finance is 1.7 times more volatile than SBI Life Insurance. It trades about -0.12 of its total potential returns per unit of risk. SBI Life Insurance is currently generating about 0.11 per unit of volatility. If you would invest  140,530  in SBI Life Insurance on October 24, 2024 and sell it today you would earn a total of  5,475  from holding SBI Life Insurance or generate 3.9% return on investment over 90 days.

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

Power Finance  vs.  SBI Life Insurance

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Power Finance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SBI Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBI 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 forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Power Finance and SBI Life

The main advantage of trading using opposite Power Finance and SBI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Finance 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 Power Finance 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.