Correlation Between Motilal Oswal and General Insurance

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

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

Diversification Opportunities for Motilal Oswal and General Insurance

-0.52

Correlation Coefficient

Motilal Oswal  General Insurance

Excellent diversification

The 3 months correlation between Motilal and General is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Motilal Oswal Financial and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and Motilal Oswal 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 Motilal Oswal Financial are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Motilal Oswal i.e., Motilal Oswal and General Insurance go up and down completely randomly.

Pair Corralation between Motilal Oswal and General Insurance

Assuming the 90 days trading horizon Motilal Oswal Financial is expected to generate 1.54 times more return on investment than General Insurance. However, Motilal Oswal is 1.54 times more volatile than General Insurance. It trades about 0.12 of its potential returns per unit of risk. General Insurance is currently generating about 0.04 per unit of risk. If you would invest  76,400  in Motilal Oswal Financial on September 4, 2024 and sell it today you would earn a total of  18,210  from holding Motilal Oswal Financial or generate 23.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Motilal Oswal Financial  vs.  General Insurance

Motilal Oswal Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motilal Oswal Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Motilal Oswal disclosed solid returns over the last few months and may actually be approaching a breakup point.

General Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, General Insurance is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Motilal Oswal and General Insurance

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

The idea behind Motilal Oswal Financial and General 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.