Correlation Between SBI Life and Ravi Kumar

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

Diversification Opportunities for SBI Life and Ravi Kumar

-0.56

Correlation Coefficient

SBI Life  Ravi Kumar

Excellent diversification

The 3 months correlation between SBI and Ravi is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Ravi Kumar Distilleries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ravi Kumar Distilleries 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 Ravi Kumar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ravi Kumar Distilleries has no effect on the direction of SBI Life i.e., SBI Life and Ravi Kumar go up and down completely randomly.

Pair Corralation between SBI Life and Ravi Kumar

Assuming the 90 days trading horizon SBI Life Insurance is expected to generate 0.64 times more return on investment than Ravi Kumar. However, SBI Life Insurance is 1.56 times less risky than Ravi Kumar. It trades about -0.07 of its potential returns per unit of risk. Ravi Kumar Distilleries is currently generating about -0.35 per unit of risk. If you would invest  146,930  in SBI Life Insurance on October 8, 2024 and sell it today you would lose (2,160) from holding SBI Life Insurance or give up 1.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

SBI Life Insurance  vs.  Ravi Kumar Distilleries

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ravi Kumar Distilleries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ravi Kumar Distilleries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ravi Kumar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SBI Life and Ravi Kumar

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

The idea behind SBI Life Insurance and Ravi Kumar Distilleries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.