Correlation Between Life Insurance and Adani Power

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

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

Diversification Opportunities for Life Insurance and Adani Power

0.67

Correlation Coefficient

Life Insurance  Adani Power

Poor diversification

The 3 months correlation between Life and Adani is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and Adani Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adani Power Limited and Life Insurance 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 Life Insurance are associated (or correlated) with Adani Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adani Power Limited has no effect on the direction of Life Insurance i.e., Life Insurance and Adani Power go up and down completely randomly.

Pair Corralation between Life Insurance and Adani Power

Assuming the 90 days trading horizon Life Insurance is expected to generate 0.34 times more return on investment than Adani Power. However, Life Insurance is 2.97 times less risky than Adani Power. It trades about 0.06 of its potential returns per unit of risk. Adani Power Limited is currently generating about -0.07 per unit of risk. If you would invest  91,845  in Life Insurance on September 12, 2024 and sell it today you would earn a total of  2,035  from holding Life Insurance or generate 2.22% return on investment over 90 days.

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

Life Insurance  vs.  Adani Power Limited

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 conflicting 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.

Adani Power Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adani Power Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators 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.

Pair Trading with Life Insurance and Adani Power

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

The idea behind Life Insurance and Adani Power 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.