Correlation Between SBI Life and Silver Touch

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

Diversification Opportunities for SBI Life and Silver Touch

0.81

Correlation Coefficient

SBI Life  Silver Touch

Very poor diversification

The 3 months correlation between SBI and Silver is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and Silver Touch Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Touch Technologies 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 Silver Touch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Touch Technologies has no effect on the direction of SBI Life i.e., SBI Life and Silver Touch go up and down completely randomly.

Pair Corralation between SBI Life and Silver Touch

Assuming the 90 days trading horizon SBI Life is expected to generate 6.6 times less return on investment than Silver Touch. But when comparing it to its historical volatility, SBI Life Insurance is 1.53 times less risky than Silver Touch. It trades about 0.02 of its potential returns per unit of risk. Silver Touch Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  37,820  in Silver Touch Technologies on October 4, 2024 and sell it today you would earn a total of  32,190  from holding Silver Touch Technologies or generate 85.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.73%
Values	Daily Returns

SBI Life Insurance  vs.  Silver Touch Technologies

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.

Silver Touch Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silver Touch Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Silver Touch 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 Silver Touch

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

The idea behind SBI Life Insurance and Silver Touch Technologies 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.