Correlation Between Radiant Cash and Nippon Life

Can any of the company-specific risk be diversified away by investing in both Radiant Cash and Nippon Life 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 Radiant Cash and Nippon Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Radiant Cash Management and Nippon Life India, you can compare the effects of market volatilities on Radiant Cash and Nippon Life 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 Radiant Cash with a short position of Nippon Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radiant Cash and Nippon Life.

Diversification Opportunities for Radiant Cash and Nippon Life

0.75

Correlation Coefficient

Radiant Cash  Nippon Life

Poor diversification

The 3 months correlation between Radiant and Nippon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Radiant Cash Management and Nippon Life India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Life India and Radiant Cash 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 Radiant Cash Management are associated (or correlated) with Nippon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Life India has no effect on the direction of Radiant Cash i.e., Radiant Cash and Nippon Life go up and down completely randomly.

Pair Corralation between Radiant Cash and Nippon Life

Assuming the 90 days trading horizon Radiant Cash Management is expected to generate 0.55 times more return on investment than Nippon Life. However, Radiant Cash Management is 1.81 times less risky than Nippon Life. It trades about -0.15 of its potential returns per unit of risk. Nippon Life India is currently generating about -0.13 per unit of risk. If you would invest  7,390  in Radiant Cash Management on November 20, 2024 and sell it today you would lose (1,093) from holding Radiant Cash Management or give up 14.79% of portfolio value over 90 days.

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

Radiant Cash Management  vs.  Nippon Life India

Radiant Cash Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Radiant Cash Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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

Pair Trading with Radiant Cash and Nippon Life

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

The idea behind Radiant Cash Management and Nippon Life India 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.