Correlation Between Taj GVK and Nippon Life

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

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

Diversification Opportunities for Taj GVK and Nippon Life

0.47

Correlation Coefficient

Taj GVK  Nippon Life

Very weak diversification

The 3 months correlation between Taj and Nippon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Taj GVK Hotels 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 Taj GVK 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 Taj GVK Hotels 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 Taj GVK i.e., Taj GVK and Nippon Life go up and down completely randomly.

Pair Corralation between Taj GVK and Nippon Life

Assuming the 90 days trading horizon Taj GVK Hotels is expected to generate 2.17 times more return on investment than Nippon Life. However, Taj GVK is 2.17 times more volatile than Nippon Life India. It trades about 0.16 of its potential returns per unit of risk. Nippon Life India is currently generating about -0.16 per unit of risk. If you would invest  34,665  in Taj GVK Hotels on October 22, 2024 and sell it today you would earn a total of  5,315  from holding Taj GVK Hotels or generate 15.33% return on investment over 90 days.

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

Taj GVK Hotels  vs.  Nippon Life India

Taj GVK Hotels

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Taj GVK sustained solid returns over the last few months and may actually be approaching a breakup point.

Nippon Life India

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Nippon Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Taj GVK and Nippon Life

The main advantage of trading using opposite Taj GVK and Nippon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taj GVK 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 Taj GVK Hotels 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.