Correlation Between SBI Life and WESTLIFE FOODWORLD

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

Diversification Opportunities for SBI Life and WESTLIFE FOODWORLD

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between SBI and WESTLIFE is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SBI Life Insurance and WESTLIFE FOODWORLD LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLIFE FOODWORLD 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 WESTLIFE FOODWORLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTLIFE FOODWORLD has no effect on the direction of SBI Life i.e., SBI Life and WESTLIFE FOODWORLD go up and down completely randomly.

Pair Corralation between SBI Life and WESTLIFE FOODWORLD

Assuming the 90 days trading horizon SBI Life Insurance is expected to generate 0.78 times more return on investment than WESTLIFE FOODWORLD. However, SBI Life Insurance is 1.28 times less risky than WESTLIFE FOODWORLD. It trades about 0.03 of its potential returns per unit of risk. WESTLIFE FOODWORLD LIMITED is currently generating about -0.02 per unit of risk. If you would invest  131,129  in SBI Life Insurance on October 6, 2024 and sell it today you would earn a total of  13,641  from holding SBI Life Insurance or generate 10.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.67%
ValuesDaily Returns

SBI Life Insurance  vs.  WESTLIFE FOODWORLD LIMITED

 Performance 
       Timeline  
SBI Life Insurance 

Risk-Adjusted Performance

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Weak
 
Strong
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 uncertain 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.
WESTLIFE FOODWORLD 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days WESTLIFE FOODWORLD LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SBI Life and WESTLIFE FOODWORLD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SBI Life and WESTLIFE FOODWORLD

The main advantage of trading using opposite SBI Life and WESTLIFE FOODWORLD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI Life position performs unexpectedly, WESTLIFE FOODWORLD 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 WESTLIFE FOODWORLD will offset losses from the drop in WESTLIFE FOODWORLD's long position.
The idea behind SBI Life Insurance and WESTLIFE FOODWORLD 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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