Correlation Between Nippon Life and Ganesh Housing

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

Diversification Opportunities for Nippon Life and Ganesh Housing

0.76

Correlation Coefficient

Nippon Life  Ganesh Housing

Poor diversification

The 3 months correlation between Nippon and Ganesh is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and Ganesh Housing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ganesh Housing 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 Ganesh Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ganesh Housing has no effect on the direction of Nippon Life i.e., Nippon Life and Ganesh Housing go up and down completely randomly.

Pair Corralation between Nippon Life and Ganesh Housing

Assuming the 90 days trading horizon Nippon Life is expected to generate 1.75 times less return on investment than Ganesh Housing. But when comparing it to its historical volatility, Nippon Life India is 1.35 times less risky than Ganesh Housing. It trades about 0.1 of its potential returns per unit of risk. Ganesh Housing is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  38,815  in Ganesh Housing on September 23, 2024 and sell it today you would earn a total of  80,005  from holding Ganesh Housing or generate 206.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

Nippon Life India  vs.  Ganesh Housing

Nippon Life India

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Nippon Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ganesh Housing

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ganesh Housing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Ganesh Housing demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Life and Ganesh Housing

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

The idea behind Nippon Life India and Ganesh Housing 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.