Correlation Between Life Insurance and Fine Organic

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

By analyzing existing cross correlation between Life Insurance and Fine Organic Industries, you can compare the effects of market volatilities on Life Insurance and Fine Organic 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 Fine Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Insurance and Fine Organic.

Diversification Opportunities for Life Insurance and Fine Organic

0.81

Correlation Coefficient

Life Insurance  Fine Organic

Very poor diversification

The 3 months correlation between Life and Fine is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and Fine Organic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Organic Industries 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 Fine Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Organic Industries has no effect on the direction of Life Insurance i.e., Life Insurance and Fine Organic go up and down completely randomly.

Pair Corralation between Life Insurance and Fine Organic

Assuming the 90 days trading horizon Life Insurance is expected to under-perform the Fine Organic. But the stock apears to be less risky and, when comparing its historical volatility, Life Insurance is 1.46 times less risky than Fine Organic. The stock trades about -0.07 of its potential returns per unit of risk. The Fine Organic Industries is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  532,505  in Fine Organic Industries on September 4, 2024 and sell it today you would lose (13,660) from holding Fine Organic Industries or give up 2.57% of portfolio value over 90 days.

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

Life Insurance  vs.  Fine Organic Industries

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.

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fine Organic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Life Insurance and Fine Organic

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

The idea behind Life Insurance and Fine Organic Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.