Correlation Between LIFENET INSURANCE and Nissan Chemical

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

By analyzing existing cross correlation between LIFENET INSURANCE CO and Nissan Chemical Corp, you can compare the effects of market volatilities on LIFENET INSURANCE and Nissan Chemical 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 LIFENET INSURANCE with a short position of Nissan Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFENET INSURANCE and Nissan Chemical.

Diversification Opportunities for LIFENET INSURANCE and Nissan Chemical

0.41

Correlation Coefficient

LIFENET INSURANCE  Nissan Chemical

Very weak diversification

The 3 months correlation between LIFENET and Nissan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LIFENET INSURANCE CO and Nissan Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Corp and LIFENET 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 LIFENET INSURANCE CO are associated (or correlated) with Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Corp has no effect on the direction of LIFENET INSURANCE i.e., LIFENET INSURANCE and Nissan Chemical go up and down completely randomly.

Pair Corralation between LIFENET INSURANCE and Nissan Chemical

Assuming the 90 days horizon LIFENET INSURANCE CO is expected to generate 1.66 times more return on investment than Nissan Chemical. However, LIFENET INSURANCE is 1.66 times more volatile than Nissan Chemical Corp. It trades about -0.06 of its potential returns per unit of risk. Nissan Chemical Corp is currently generating about -0.11 per unit of risk. If you would invest  1,120  in LIFENET INSURANCE CO on December 22, 2024 and sell it today you would lose (80.00) from holding LIFENET INSURANCE CO or give up 7.14% of portfolio value over 90 days.

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

LIFENET INSURANCE CO  vs.  Nissan Chemical Corp

LIFENET INSURANCE

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFENET INSURANCE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nissan Chemical Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nissan Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with LIFENET INSURANCE and Nissan Chemical

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

The idea behind LIFENET INSURANCE CO and Nissan Chemical Corp 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.