Correlation Between Nippon Life and Medplus Health

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

Diversification Opportunities for Nippon Life and Medplus Health

0.76

Correlation Coefficient

Nippon Life  Medplus Health

Poor diversification

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

Pair Corralation between Nippon Life and Medplus Health

Assuming the 90 days trading horizon Nippon Life is expected to generate 1.45 times less return on investment than Medplus Health. In addition to that, Nippon Life is 1.48 times more volatile than Medplus Health Services. It trades about 0.09 of its total potential returns per unit of risk. Medplus Health Services is currently generating about 0.18 per unit of volatility. If you would invest  69,025  in Medplus Health Services on September 26, 2024 and sell it today you would earn a total of  14,615  from holding Medplus Health Services or generate 21.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Nippon Life India  vs.  Medplus Health Services

Nippon Life India

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Nippon Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Medplus Health Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medplus Health Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Medplus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Life and Medplus Health

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

The idea behind Nippon Life India and Medplus Health 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.