Correlation Between Aster DM and Nippon Life

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

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

Diversification Opportunities for Aster DM and Nippon Life

0.92

Correlation Coefficient

Aster DM  Nippon Life

Almost no diversification

The 3 months correlation between Aster and Nippon is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Nippon Life India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Life India and Aster DM 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 Aster DM Healthcare are associated (or correlated) with Nippon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Life India has no effect on the direction of Aster DM i.e., Aster DM and Nippon Life go up and down completely randomly.

Pair Corralation between Aster DM and Nippon Life

Assuming the 90 days trading horizon Aster DM Healthcare is expected to generate 0.61 times more return on investment than Nippon Life. However, Aster DM Healthcare is 1.63 times less risky than Nippon Life. It trades about -0.11 of its potential returns per unit of risk. Nippon Life India is currently generating about -0.11 per unit of risk. If you would invest  50,123  in Aster DM Healthcare on December 26, 2024 and sell it today you would lose (6,093) from holding Aster DM Healthcare or give up 12.16% of portfolio value over 90 days.

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

Aster DM Healthcare  vs.  Nippon Life India

Aster DM Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aster DM Healthcare 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Nippon Life India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nippon Life India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aster DM and Nippon Life

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

The idea behind Aster DM Healthcare and Nippon Life India 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.