Correlation Between Sanlam and Life Insurance

Can any of the company-specific risk be diversified away by investing in both Sanlam and Life Insurance 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 Sanlam and Life Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sanlam Ltd PK and Life Insurance, you can compare the effects of market volatilities on Sanlam and Life Insurance 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 Sanlam with a short position of Life Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanlam and Life Insurance.

Diversification Opportunities for Sanlam and Life Insurance

-0.4

Correlation Coefficient

Sanlam  Life Insurance

Very good diversification

The 3 months correlation between Sanlam and Life is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sanlam Ltd PK and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and Sanlam 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 Sanlam Ltd PK are associated (or correlated) with Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of Sanlam i.e., Sanlam and Life Insurance go up and down completely randomly.

Pair Corralation between Sanlam and Life Insurance

Assuming the 90 days horizon Sanlam Ltd PK is expected to under-perform the Life Insurance. In addition to that, Sanlam is 1.91 times more volatile than Life Insurance. It trades about -0.07 of its total potential returns per unit of risk. Life Insurance is currently generating about 0.17 per unit of volatility. If you would invest  1,400  in Life Insurance on October 24, 2024 and sell it today you would earn a total of  150.00  from holding Life Insurance or generate 10.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sanlam Ltd PK  vs.  Life Insurance

Sanlam Ltd PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanlam Ltd PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Life Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Life Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Life Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sanlam and Life Insurance

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

The idea behind Sanlam Ltd PK and Life Insurance 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.