Correlation Between JSW Holdings and Nippon Life

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

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

Diversification Opportunities for JSW Holdings and Nippon Life

0.43

Correlation Coefficient

JSW Holdings  Nippon Life

Very weak diversification

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

Pair Corralation between JSW Holdings and Nippon Life

Assuming the 90 days trading horizon JSW Holdings Limited is expected to generate 1.93 times more return on investment than Nippon Life. However, JSW Holdings is 1.93 times more volatile than Nippon Life India. It trades about 0.21 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  784,005  in JSW Holdings Limited on September 13, 2024 and sell it today you would earn a total of  666,765  from holding JSW Holdings Limited or generate 85.05% return on investment over 90 days.

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

JSW Holdings Limited  vs.  Nippon Life India

JSW Holdings Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Nippon Life India

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Nippon Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSW Holdings and Nippon Life

The main advantage of trading using opposite JSW Holdings and Nippon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JSW Holdings 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 JSW Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.