Correlation Between GPT Healthcare and Nippon Life

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

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

Diversification Opportunities for GPT Healthcare and Nippon Life

0.65

Correlation Coefficient

GPT Healthcare  Nippon Life

Poor diversification

The 3 months correlation between GPT and Nippon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding GPT 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 GPT Healthcare 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 GPT 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 GPT Healthcare i.e., GPT Healthcare and Nippon Life go up and down completely randomly.

Pair Corralation between GPT Healthcare and Nippon Life

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 0.75 times more return on investment than Nippon Life. However, GPT Healthcare is 1.33 times less risky than Nippon Life. It trades about -0.08 of its potential returns per unit of risk. Nippon Life India is currently generating about -0.22 per unit of risk. If you would invest  18,541  in GPT Healthcare on October 24, 2024 and sell it today you would lose (648.00) from holding GPT Healthcare or give up 3.49% of portfolio value over 90 days.

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

GPT Healthcare  vs.  Nippon Life India

GPT Healthcare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GPT Healthcare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, GPT Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nippon Life India

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Nippon Life is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GPT Healthcare and Nippon Life

The main advantage of trading using opposite GPT Healthcare and Nippon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GPT Healthcare 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 GPT 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.