Correlation Between Nippon Life and Fortis Healthcare

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

Diversification Opportunities for Nippon Life and Fortis Healthcare

0.32

Correlation Coefficient

Nippon Life  Fortis Healthcare

Weak diversification

The 3 months correlation between Nippon and Fortis is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and Fortis Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Healthcare 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 Fortis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Healthcare has no effect on the direction of Nippon Life i.e., Nippon Life and Fortis Healthcare go up and down completely randomly.

Pair Corralation between Nippon Life and Fortis Healthcare

Assuming the 90 days trading horizon Nippon Life is expected to generate 5.52 times less return on investment than Fortis Healthcare. In addition to that, Nippon Life is 1.18 times more volatile than Fortis Healthcare Limited. It trades about 0.02 of its total potential returns per unit of risk. Fortis Healthcare Limited is currently generating about 0.13 per unit of volatility. If you would invest  56,185  in Fortis Healthcare Limited on September 2, 2024 and sell it today you would earn a total of  9,735  from holding Fortis Healthcare Limited or generate 17.33% return on investment over 90 days.

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

Nippon Life India  vs.  Fortis Healthcare Limited

Nippon Life India

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Nippon Life is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Fortis Healthcare

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Healthcare Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fortis Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Life and Fortis Healthcare

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

The idea behind Nippon Life India and Fortis Healthcare Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.