Correlation Between Pilani Investment and SBI Life

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

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

Diversification Opportunities for Pilani Investment and SBI Life

-0.29

Correlation Coefficient

Pilani Investment  SBI Life

Very good diversification

The 3 months correlation between Pilani and SBI is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pilani Investment and 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 Pilani Investment 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 Pilani Investment and 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 Pilani Investment i.e., Pilani Investment and SBI Life go up and down completely randomly.

Pair Corralation between Pilani Investment and SBI Life

Assuming the 90 days trading horizon Pilani Investment and is expected to under-perform the SBI Life. In addition to that, Pilani Investment is 1.05 times more volatile than SBI Life Insurance. It trades about -0.4 of its total potential returns per unit of risk. SBI Life Insurance is currently generating about -0.2 per unit of volatility. If you would invest  149,520  in SBI Life Insurance on September 25, 2024 and sell it today you would lose (8,990) from holding SBI Life Insurance or give up 6.01% of portfolio value over 90 days.

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

Pilani Investment and  vs.  SBI Life Insurance

Pilani Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pilani Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Pilani Investment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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 unsteady performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Pilani Investment and SBI Life

The main advantage of trading using opposite Pilani Investment and SBI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pilani Investment 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 Pilani Investment and 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.