Correlation Between Gujarat Fluorochemicals and Nippon Life

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

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

Diversification Opportunities for Gujarat Fluorochemicals and Nippon Life

0.45

Correlation Coefficient

Gujarat Fluorochemicals  Nippon Life

Very weak diversification

The 3 months correlation between Gujarat and Nippon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite 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 Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited 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 Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Nippon Life go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Nippon Life

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to under-perform the Nippon Life. But the stock apears to be less risky and, when comparing its historical volatility, Gujarat Fluorochemicals Limited is 1.1 times less risky than Nippon Life. The stock trades about -0.15 of its potential returns per unit of risk. The Nippon Life India is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  65,245  in Nippon Life India on October 22, 2024 and sell it today you would earn a total of  3,530  from holding Nippon Life India or generate 5.41% return on investment over 90 days.

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

Gujarat Fluorochemicals Limite  vs.  Nippon Life India

Gujarat Fluorochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Fluorochemicals Limited 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 technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nippon Life India

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Nippon Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gujarat Fluorochemicals and Nippon Life

The main advantage of trading using opposite Gujarat Fluorochemicals and Nippon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.