Correlation Between Visa and SBI Life

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

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

Diversification Opportunities for Visa and SBI Life

0.19

Correlation Coefficient

Visa  SBI Life

Average diversification

The 3 months correlation between Visa and SBI is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SBI Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Life Insurance and Visa 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 Visa Class A are associated (or correlated) with SBI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Life Insurance has no effect on the direction of Visa i.e., Visa and SBI Life go up and down completely randomly.

Pair Corralation between Visa and SBI Life

Taking into account the 90-day investment horizon Visa is expected to generate 1.17 times less return on investment than SBI Life. But when comparing it to its historical volatility, Visa Class A is 1.33 times less risky than SBI Life. It trades about 0.13 of its potential returns per unit of risk. SBI Life Insurance is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  140,118  in SBI Life Insurance on December 28, 2024 and sell it today you would earn a total of  14,667  from holding SBI Life Insurance or generate 10.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  SBI Life Insurance

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SBI Life Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Life Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, SBI Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and SBI Life

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

The idea behind Visa Class A and SBI 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.