Correlation Between Bandhan Bank and Life Insurance

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

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

Diversification Opportunities for Bandhan Bank and Life Insurance

0.81

Correlation Coefficient

Bandhan Bank  Life Insurance

Very poor diversification

The 3 months correlation between Bandhan and Life is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bandhan Bank Limited and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and Bandhan Bank 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 Bandhan Bank Limited 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 Bandhan Bank i.e., Bandhan Bank and Life Insurance go up and down completely randomly.

Pair Corralation between Bandhan Bank and Life Insurance

Assuming the 90 days trading horizon Bandhan Bank Limited is expected to under-perform the Life Insurance. In addition to that, Bandhan Bank is 1.96 times more volatile than Life Insurance. It trades about -0.08 of its total potential returns per unit of risk. Life Insurance is currently generating about -0.07 per unit of volatility. If you would invest  105,860  in Life Insurance on September 2, 2024 and sell it today you would lose (7,310) from holding Life Insurance or give up 6.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Bandhan Bank Limited  vs.  Life Insurance

Bandhan Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bandhan Bank Limited 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 fundamental drivers remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bandhan Bank and Life Insurance

The main advantage of trading using opposite Bandhan Bank and Life Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bandhan Bank 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 Bandhan Bank Limited 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.