Correlation Between ICICI Lombard and Nippon Life

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

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

Diversification Opportunities for ICICI Lombard and Nippon Life

0.74

Correlation Coefficient

ICICI Lombard  Nippon Life

Poor diversification

The 3 months correlation between ICICI and Nippon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Lombard General 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 ICICI Lombard 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 ICICI Lombard General 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 ICICI Lombard i.e., ICICI Lombard and Nippon Life go up and down completely randomly.

Pair Corralation between ICICI Lombard and Nippon Life

Assuming the 90 days trading horizon ICICI Lombard General is expected to generate 0.51 times more return on investment than Nippon Life. However, ICICI Lombard General is 1.95 times less risky than Nippon Life. It trades about -0.1 of its potential returns per unit of risk. Nippon Life India is currently generating about -0.12 per unit of risk. If you would invest  187,110  in ICICI Lombard General on November 28, 2024 and sell it today you would lose (18,335) from holding ICICI Lombard General or give up 9.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

ICICI Lombard General  vs.  Nippon Life India

ICICI Lombard General

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICICI Lombard General has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ICICI Lombard and Nippon Life

The main advantage of trading using opposite ICICI Lombard and Nippon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Lombard 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 ICICI Lombard General 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.