Correlation Between Nippon Life and ICICI Securities

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

Diversification Opportunities for Nippon Life and ICICI Securities

-0.16

Correlation Coefficient

Nippon Life  ICICI Securities

Good diversification

The 3 months correlation between Nippon and ICICI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and ICICI Securities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Securities 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 ICICI Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Securities has no effect on the direction of Nippon Life i.e., Nippon Life and ICICI Securities go up and down completely randomly.

Pair Corralation between Nippon Life and ICICI Securities

Assuming the 90 days trading horizon Nippon Life India is expected to generate 1.88 times more return on investment than ICICI Securities. However, Nippon Life is 1.88 times more volatile than ICICI Securities Limited. It trades about 0.04 of its potential returns per unit of risk. ICICI Securities Limited is currently generating about 0.07 per unit of risk. If you would invest  66,555  in Nippon Life India on August 30, 2024 and sell it today you would earn a total of  2,550  from holding Nippon Life India or generate 3.83% return on investment over 90 days.

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

Nippon Life India  vs.  ICICI Securities Limited

Nippon Life India

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

ICICI Securities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Securities Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ICICI Securities is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nippon Life and ICICI Securities

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

The idea behind Nippon Life India and ICICI Securities Limited 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.