Correlation Between Nippon Life and Bombay Burmah

Can any of the company-specific risk be diversified away by investing in both Nippon Life and Bombay Burmah 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 Bombay Burmah 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 Bombay Burmah Trading, you can compare the effects of market volatilities on Nippon Life and Bombay Burmah 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 Bombay Burmah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Life and Bombay Burmah.

Diversification Opportunities for Nippon Life and Bombay Burmah

-0.4

Correlation Coefficient

Nippon Life  Bombay Burmah

Very good diversification

The 3 months correlation between Nippon and Bombay is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and Bombay Burmah Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombay Burmah Trading 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 Bombay Burmah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombay Burmah Trading has no effect on the direction of Nippon Life i.e., Nippon Life and Bombay Burmah go up and down completely randomly.

Pair Corralation between Nippon Life and Bombay Burmah

Assuming the 90 days trading horizon Nippon Life India is expected to generate 1.23 times more return on investment than Bombay Burmah. However, Nippon Life is 1.23 times more volatile than Bombay Burmah Trading. It trades about 0.04 of its potential returns per unit of risk. Bombay Burmah Trading is currently generating about -0.32 per unit of risk. If you would invest  73,680  in Nippon Life India on October 7, 2024 and sell it today you would earn a total of  2,145  from holding Nippon Life India or generate 2.91% return on investment over 90 days.

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

Nippon Life India  vs.  Bombay Burmah Trading

Nippon Life India

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Nippon Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bombay Burmah Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombay Burmah Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Nippon Life and Bombay Burmah

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

The idea behind Nippon Life India and Bombay Burmah Trading 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.