Correlation Between SBI Life and Kaushalya Infrastructure

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

Diversification Opportunities for SBI Life and Kaushalya Infrastructure

0.16

Correlation Coefficient

SBI Life  Kaushalya Infrastructure

Average diversification

The 3 months correlation between SBI and Kaushalya is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Kaushalya Infrastructure Devel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaushalya Infrastructure 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 Kaushalya Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaushalya Infrastructure has no effect on the direction of SBI Life i.e., SBI Life and Kaushalya Infrastructure go up and down completely randomly.

Pair Corralation between SBI Life and Kaushalya Infrastructure

Assuming the 90 days trading horizon SBI Life is expected to generate 1.16 times less return on investment than Kaushalya Infrastructure. But when comparing it to its historical volatility, SBI Life Insurance is 2.84 times less risky than Kaushalya Infrastructure. It trades about 0.11 of its potential returns per unit of risk. Kaushalya Infrastructure Development is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  86,260  in Kaushalya Infrastructure Development on December 27, 2024 and sell it today you would earn a total of  5,835  from holding Kaushalya Infrastructure Development or generate 6.76% return on investment over 90 days.

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

SBI Life Insurance  vs.  Kaushalya Infrastructure Devel

SBI Life Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Life Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, SBI Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kaushalya Infrastructure

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kaushalya Infrastructure Development are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Kaushalya Infrastructure may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SBI Life and Kaushalya Infrastructure

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

The idea behind SBI Life Insurance and Kaushalya Infrastructure Development 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.