Correlation Between Nippon Life and PTC INDUSTRIES

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

Diversification Opportunities for Nippon Life and PTC INDUSTRIES

0.11

Correlation Coefficient

Nippon Life  PTC INDUSTRIES

Average diversification

The 3 months correlation between Nippon and PTC is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and PTC INDUSTRIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTC INDUSTRIES LTD 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 PTC INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTC INDUSTRIES LTD has no effect on the direction of Nippon Life i.e., Nippon Life and PTC INDUSTRIES go up and down completely randomly.

Pair Corralation between Nippon Life and PTC INDUSTRIES

Assuming the 90 days trading horizon Nippon Life India is expected to under-perform the PTC INDUSTRIES. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Life India is 1.23 times less risky than PTC INDUSTRIES. The stock trades about -0.15 of its potential returns per unit of risk. The PTC INDUSTRIES LTD is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,180,150  in PTC INDUSTRIES LTD on December 4, 2024 and sell it today you would lose (99,955) from holding PTC INDUSTRIES LTD or give up 8.47% of portfolio value over 90 days.

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

Nippon Life India  vs.  PTC INDUSTRIES LTD

Nippon Life India

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PTC INDUSTRIES LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days PTC INDUSTRIES LTD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, PTC INDUSTRIES is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nippon Life and PTC INDUSTRIES

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

The idea behind Nippon Life India and PTC INDUSTRIES LTD 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.