Correlation Between Nippon Life and Agro Tech

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

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

Diversification Opportunities for Nippon Life and Agro Tech

0.17

Correlation Coefficient

Nippon Life  Agro Tech

Average diversification

The 3 months correlation between Nippon and Agro is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and Nippon Life 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 Nippon Life India are associated (or correlated) with Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of Nippon Life i.e., Nippon Life and Agro Tech go up and down completely randomly.

Pair Corralation between Nippon Life and Agro Tech

Assuming the 90 days trading horizon Nippon Life India is expected to under-perform the Agro Tech. In addition to that, Nippon Life is 1.18 times more volatile than Agro Tech Foods. It trades about -0.16 of its total potential returns per unit of risk. Agro Tech Foods is currently generating about 0.07 per unit of volatility. If you would invest  89,585  in Agro Tech Foods on October 22, 2024 and sell it today you would earn a total of  2,200  from holding Agro Tech Foods or generate 2.46% return on investment over 90 days.

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

Nippon Life India  vs.  Agro Tech Foods

Nippon Life India

Risk-Adjusted Performance

3 of 100

Insignificant

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.

Agro Tech Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Agro Tech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nippon Life and Agro Tech

The main advantage of trading using opposite Nippon Life and Agro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Life position performs unexpectedly, Agro Tech 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 Agro Tech will offset losses from the drop in Agro Tech's long position.

The idea behind Nippon Life India and Agro Tech Foods 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.