Correlation Between SBI Life and MIC Electronics

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

Diversification Opportunities for SBI Life and MIC Electronics

-0.03

Correlation Coefficient

SBI Life  MIC Electronics

Good diversification

The 3 months correlation between SBI and MIC is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics 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 MIC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIC Electronics has no effect on the direction of SBI Life i.e., SBI Life and MIC Electronics go up and down completely randomly.

Pair Corralation between SBI Life and MIC Electronics

Assuming the 90 days trading horizon SBI Life Insurance is expected to generate 0.42 times more return on investment than MIC Electronics. However, SBI Life Insurance is 2.36 times less risky than MIC Electronics. It trades about 0.13 of its potential returns per unit of risk. MIC Electronics Limited is currently generating about -0.2 per unit of risk. If you would invest  138,776  in SBI Life Insurance on December 31, 2024 and sell it today you would earn a total of  16,009  from holding SBI Life Insurance or generate 11.54% 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.  MIC Electronics Limited

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 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, SBI Life may actually be approaching a critical reversion point that can send shares even higher in May 2025.

MIC Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days MIC Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with SBI Life and MIC Electronics

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

The idea behind SBI Life Insurance and MIC Electronics 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.