Correlation Between REC and Life Insurance

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

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

Diversification Opportunities for REC and Life Insurance

0.47

Correlation Coefficient

REC  Life Insurance

Very weak diversification

The 3 months correlation between REC and Life is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding REC Limited and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and REC 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 REC 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 REC i.e., REC and Life Insurance go up and down completely randomly.

Pair Corralation between REC and Life Insurance

Assuming the 90 days trading horizon REC Limited is expected to generate 1.43 times more return on investment than Life Insurance. However, REC is 1.43 times more volatile than Life Insurance. It trades about 0.03 of its potential returns per unit of risk. Life Insurance is currently generating about -0.01 per unit of risk. If you would invest  50,570  in REC Limited on September 23, 2024 and sell it today you would earn a total of  755.00  from holding REC Limited or generate 1.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

REC Limited  vs.  Life Insurance

REC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, REC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with REC and Life Insurance

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

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.