Correlation Between Rajnandini Metal and Nippon Life

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

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

Diversification Opportunities for Rajnandini Metal and Nippon Life

0.07

Correlation Coefficient

Rajnandini Metal  Nippon Life

Significant diversification

The 3 months correlation between Rajnandini and Nippon is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal Limited 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 Rajnandini Metal 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 Rajnandini Metal Limited 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 Rajnandini Metal i.e., Rajnandini Metal and Nippon Life go up and down completely randomly.

Pair Corralation between Rajnandini Metal and Nippon Life

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the Nippon Life. In addition to that, Rajnandini Metal is 1.05 times more volatile than Nippon Life India. It trades about -0.18 of its total potential returns per unit of risk. Nippon Life India is currently generating about -0.16 per unit of volatility. If you would invest  75,015  in Nippon Life India on October 20, 2024 and sell it today you would lose (6,240) from holding Nippon Life India or give up 8.32% of portfolio value over 90 days.

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

Rajnandini Metal Limited  vs.  Nippon Life India

Rajnandini Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nippon Life India

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Nippon Life is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rajnandini Metal and Nippon Life

The main advantage of trading using opposite Rajnandini Metal and Nippon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rajnandini Metal 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 Rajnandini Metal Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.