Correlation Between Nippon Life and JSW Holdings

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

Diversification Opportunities for Nippon Life and JSW Holdings

0.45

Correlation Coefficient

Nippon Life  JSW Holdings

Very weak diversification

The 3 months correlation between Nippon and JSW is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and JSW Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Holdings Limited 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 JSW Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Holdings Limited has no effect on the direction of Nippon Life i.e., Nippon Life and JSW Holdings go up and down completely randomly.

Pair Corralation between Nippon Life and JSW Holdings

Assuming the 90 days trading horizon Nippon Life is expected to generate 1.2 times less return on investment than JSW Holdings. But when comparing it to its historical volatility, Nippon Life India is 1.28 times less risky than JSW Holdings. It trades about 0.13 of its potential returns per unit of risk. JSW Holdings Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  394,540  in JSW Holdings Limited on October 6, 2024 and sell it today you would earn a total of  1,382,000  from holding JSW Holdings Limited or generate 350.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Nippon Life India  vs.  JSW Holdings Limited

Nippon Life India

Risk-Adjusted Performance

10 of 100

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

JSW Holdings Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Life and JSW Holdings

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

The idea behind Nippon Life India and JSW Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.