Correlation Between SBI Life and Fertilizers

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

Diversification Opportunities for SBI Life and Fertilizers

-0.66

Correlation Coefficient

SBI Life  Fertilizers

Excellent diversification

The 3 months correlation between SBI and Fertilizers is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Fertilizers and Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fertilizers and Chemicals 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 Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fertilizers and Chemicals has no effect on the direction of SBI Life i.e., SBI Life and Fertilizers go up and down completely randomly.

Pair Corralation between SBI Life and Fertilizers

Assuming the 90 days trading horizon SBI Life Insurance is expected to under-perform the Fertilizers. But the stock apears to be less risky and, when comparing its historical volatility, SBI Life Insurance is 1.99 times less risky than Fertilizers. The stock trades about -0.11 of its potential returns per unit of risk. The Fertilizers and Chemicals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  83,665  in Fertilizers and Chemicals on October 24, 2024 and sell it today you would earn a total of  10,385  from holding Fertilizers and Chemicals or generate 12.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

SBI Life Insurance  vs.  Fertilizers and Chemicals

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.

Fertilizers and Chemicals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fertilizers and Chemicals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fertilizers unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Life and Fertilizers

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

The idea behind SBI Life Insurance and Fertilizers and Chemicals 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.