Correlation Between SBI Life and NRB Industrial

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

Diversification Opportunities for SBI Life and NRB Industrial

-0.41

Correlation Coefficient

SBI Life  NRB Industrial

Very good diversification

The 3 months correlation between SBI and NRB is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and NRB Industrial Bearings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRB Industrial Bearings 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 NRB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRB Industrial Bearings has no effect on the direction of SBI Life i.e., SBI Life and NRB Industrial go up and down completely randomly.

Pair Corralation between SBI Life and NRB Industrial

Assuming the 90 days trading horizon SBI Life Insurance is expected to generate 0.54 times more return on investment than NRB Industrial. However, SBI Life Insurance is 1.86 times less risky than NRB Industrial. It trades about 0.11 of its potential returns per unit of risk. NRB Industrial Bearings is currently generating about 0.0 per unit of risk. If you would invest  140,263  in SBI Life Insurance on December 21, 2024 and sell it today you would earn a total of  14,377  from holding SBI Life Insurance or generate 10.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

SBI Life Insurance  vs.  NRB Industrial Bearings

SBI Life Insurance

Risk-Adjusted Performance

Modest

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 weak forward indicators, SBI Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NRB Industrial Bearings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NRB Industrial Bearings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NRB Industrial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SBI Life and NRB Industrial

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

The idea behind SBI Life Insurance and NRB Industrial Bearings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.