Correlation Between Bharti Airtel and SBI Life

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

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

Diversification Opportunities for Bharti Airtel and SBI Life

0.73

Correlation Coefficient

Bharti Airtel  SBI Life

Poor diversification

The 3 months correlation between Bharti and SBI is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bharti Airtel Limited 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 Bharti Airtel 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 Bharti Airtel Limited 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 Bharti Airtel i.e., Bharti Airtel and SBI Life go up and down completely randomly.

Pair Corralation between Bharti Airtel and SBI Life

Assuming the 90 days trading horizon Bharti Airtel Limited is expected to generate 0.94 times more return on investment than SBI Life. However, Bharti Airtel Limited is 1.06 times less risky than SBI Life. It trades about -0.12 of its potential returns per unit of risk. SBI Life Insurance is currently generating about -0.31 per unit of risk. If you would invest  175,665  in Bharti Airtel Limited on September 24, 2024 and sell it today you would lose (17,855) from holding Bharti Airtel Limited or give up 10.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Bharti Airtel Limited  vs.  SBI Life Insurance

Bharti Airtel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharti Airtel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 unsteady performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bharti Airtel and SBI Life

The main advantage of trading using opposite Bharti Airtel and SBI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bharti Airtel 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 Bharti Airtel Limited 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.