Correlation Between SBI Life and Patanjali Foods

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

Diversification Opportunities for SBI Life and Patanjali Foods

-0.58

Correlation Coefficient

SBI Life  Patanjali Foods

Excellent diversification

The 3 months correlation between SBI and Patanjali is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods 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 Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of SBI Life i.e., SBI Life and Patanjali Foods go up and down completely randomly.

Pair Corralation between SBI Life and Patanjali Foods

Assuming the 90 days trading horizon SBI Life Insurance is expected to under-perform the Patanjali Foods. But the stock apears to be less risky and, when comparing its historical volatility, SBI Life Insurance is 1.31 times less risky than Patanjali Foods. The stock trades about -0.25 of its potential returns per unit of risk. The Patanjali Foods Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  162,080  in Patanjali Foods Limited on October 4, 2024 and sell it today you would earn a total of  16,115  from holding Patanjali Foods Limited or generate 9.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

SBI Life Insurance  vs.  Patanjali Foods Limited

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 fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Patanjali Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patanjali Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SBI Life and Patanjali Foods

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

The idea behind SBI Life Insurance and Patanjali Foods 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.

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