Correlation Between Nippon Life and Central Bank

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

Diversification Opportunities for Nippon Life and Central Bank

0.36

Correlation Coefficient

Nippon Life  Central Bank

Weak diversification

The 3 months correlation between Nippon and Central is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and Central Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Bank 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 Central Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Bank has no effect on the direction of Nippon Life i.e., Nippon Life and Central Bank go up and down completely randomly.

Pair Corralation between Nippon Life and Central Bank

Assuming the 90 days trading horizon Nippon Life India is expected to generate 1.3 times more return on investment than Central Bank. However, Nippon Life is 1.3 times more volatile than Central Bank of. It trades about 0.19 of its potential returns per unit of risk. Central Bank of is currently generating about -0.1 per unit of risk. If you would invest  68,235  in Nippon Life India on October 4, 2024 and sell it today you would earn a total of  7,550  from holding Nippon Life India or generate 11.06% return on investment over 90 days.

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

Nippon Life India  vs.  Central Bank of

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 unfluctuating fundamental indicators, Nippon Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Central Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Central Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nippon Life and Central Bank

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

The idea behind Nippon Life India and Central Bank of 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.