Correlation Between SBI Life and Gujarat Alkalies

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

Diversification Opportunities for SBI Life and Gujarat Alkalies

0.65

Correlation Coefficient

SBI Life  Gujarat Alkalies

Poor diversification

The 3 months correlation between SBI and Gujarat is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Gujarat Alkalies and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Alkalies 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 Gujarat Alkalies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Alkalies has no effect on the direction of SBI Life i.e., SBI Life and Gujarat Alkalies go up and down completely randomly.

Pair Corralation between SBI Life and Gujarat Alkalies

Assuming the 90 days trading horizon SBI Life Insurance is expected to generate 0.62 times more return on investment than Gujarat Alkalies. However, SBI Life Insurance is 1.6 times less risky than Gujarat Alkalies. It trades about -0.11 of its potential returns per unit of risk. Gujarat Alkalies and is currently generating about -0.12 per unit of risk. If you would invest  143,775  in SBI Life Insurance on September 30, 2024 and sell it today you would lose (3,245) from holding SBI Life Insurance or give up 2.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

SBI Life Insurance  vs.  Gujarat Alkalies and

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.

Gujarat Alkalies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Alkalies and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SBI Life and Gujarat Alkalies

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

The idea behind SBI Life Insurance and Gujarat Alkalies and 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.