Correlation Between Datamatics Global and Nippon Life

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

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

Diversification Opportunities for Datamatics Global and Nippon Life

0.43

Correlation Coefficient

Datamatics Global  Nippon Life

Very weak diversification

The 3 months correlation between Datamatics and Nippon is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Datamatics Global Services 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 Datamatics Global 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 Datamatics Global Services 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 Datamatics Global i.e., Datamatics Global and Nippon Life go up and down completely randomly.

Pair Corralation between Datamatics Global and Nippon Life

Assuming the 90 days trading horizon Datamatics Global is expected to generate 8.5 times less return on investment than Nippon Life. But when comparing it to its historical volatility, Datamatics Global Services is 1.19 times less risky than Nippon Life. It trades about 0.01 of its potential returns per unit of risk. Nippon Life India is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  67,489  in Nippon Life India on September 24, 2024 and sell it today you would earn a total of  7,536  from holding Nippon Life India or generate 11.17% return on investment over 90 days.

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

Datamatics Global Services  vs.  Nippon Life India

Datamatics Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datamatics Global Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Datamatics Global is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Nippon Life India

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Nippon Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datamatics Global and Nippon Life

The main advantage of trading using opposite Datamatics Global and Nippon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datamatics Global 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 Datamatics Global Services 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.