Correlation Between Nippon Life and Global Health

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

Diversification Opportunities for Nippon Life and Global Health

0.68

Correlation Coefficient

Nippon Life  Global Health

Poor diversification

The 3 months correlation between Nippon and Global is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and Global Health Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health 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 Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health Limited has no effect on the direction of Nippon Life i.e., Nippon Life and Global Health go up and down completely randomly.

Pair Corralation between Nippon Life and Global Health

Assuming the 90 days trading horizon Nippon Life India is expected to generate 1.09 times more return on investment than Global Health. However, Nippon Life is 1.09 times more volatile than Global Health Limited. It trades about 0.13 of its potential returns per unit of risk. Global Health Limited is currently generating about 0.1 per unit of risk. If you would invest  20,936  in Nippon Life India on October 6, 2024 and sell it today you would earn a total of  54,889  from holding Nippon Life India or generate 262.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.36%
Values	Daily Returns

Nippon Life India  vs.  Global Health 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.

Global Health Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Global Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Life and Global Health

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

The idea behind Nippon Life India and Global Health 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.