Correlation Between Nippon Life and Hybrid Financial

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

Diversification Opportunities for Nippon Life and Hybrid Financial

0.44

Correlation Coefficient

Nippon Life  Hybrid Financial

Very weak diversification

The 3 months correlation between Nippon and Hybrid is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and Hybrid Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hybrid Financial Services 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 Hybrid Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hybrid Financial Services has no effect on the direction of Nippon Life i.e., Nippon Life and Hybrid Financial go up and down completely randomly.

Pair Corralation between Nippon Life and Hybrid Financial

Assuming the 90 days trading horizon Nippon Life India is expected to under-perform the Hybrid Financial. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Life India is 1.12 times less risky than Hybrid Financial. The stock trades about -0.01 of its potential returns per unit of risk. The Hybrid Financial Services is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,314  in Hybrid Financial Services on October 20, 2024 and sell it today you would lose (28.00) from holding Hybrid Financial Services or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.05%
Values	Daily Returns

Nippon Life India  vs.  Hybrid Financial Services

Nippon Life India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Life India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Nippon Life is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hybrid Financial Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hybrid Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Hybrid Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nippon Life and Hybrid Financial

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

The idea behind Nippon Life India and Hybrid Financial Services 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.