Correlation Between SBI Life and Engineers India

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

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

Diversification Opportunities for SBI Life and Engineers India

-0.19

Correlation Coefficient

SBI Life  Engineers India

Good diversification

The 3 months correlation between SBI and Engineers is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Engineers India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engineers India and SBI Life 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 SBI Life Insurance are associated (or correlated) with Engineers India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engineers India has no effect on the direction of SBI Life i.e., SBI Life and Engineers India go up and down completely randomly.

Pair Corralation between SBI Life and Engineers India

Assuming the 90 days trading horizon SBI Life Insurance is expected to under-perform the Engineers India. But the stock apears to be less risky and, when comparing its historical volatility, SBI Life Insurance is 1.65 times less risky than Engineers India. The stock trades about -0.09 of its potential returns per unit of risk. The Engineers India Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17,625  in Engineers India Limited on October 22, 2024 and sell it today you would earn a total of  302.00  from holding Engineers India Limited or generate 1.71% return on investment over 90 days.

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

SBI Life Insurance  vs.  Engineers India Limited

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 weak 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.

Engineers India

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Engineers India Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Engineers India is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SBI Life and Engineers India

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

The idea behind SBI Life Insurance and Engineers India Limited 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.