Correlation Between Nippon Life and Eros International

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

Diversification Opportunities for Nippon Life and Eros International

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Nippon and Eros is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and Eros International Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros International Media 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 Eros International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros International Media has no effect on the direction of Nippon Life i.e., Nippon Life and Eros International go up and down completely randomly.

Pair Corralation between Nippon Life and Eros International

Assuming the 90 days trading horizon Nippon Life India is expected to generate 0.74 times more return on investment than Eros International. However, Nippon Life India is 1.35 times less risky than Eros International. It trades about 0.14 of its potential returns per unit of risk. Eros International Media is currently generating about -0.02 per unit of risk. If you would invest  20,294  in Nippon Life India on October 5, 2024 and sell it today you would earn a total of  55,491  from holding Nippon Life India or generate 273.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.33%
ValuesDaily Returns

Nippon Life India  vs.  Eros International Media

 Performance 
       Timeline  
Nippon Life India 

Risk-Adjusted Performance

10 of 100

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Eros International Media 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nippon Life and Eros International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nippon Life and Eros International

The main advantage of trading using opposite Nippon Life and Eros International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Life position performs unexpectedly, Eros International 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 Eros International will offset losses from the drop in Eros International's long position.
The idea behind Nippon Life India and Eros International Media 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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