Correlation Between Nippon Life and ILFS Investment

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

Diversification Opportunities for Nippon Life and ILFS Investment

0.1

Correlation Coefficient

Nippon Life  ILFS Investment

Average diversification

The 3 months correlation between Nippon and ILFS is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and ILFS Investment Managers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ILFS Investment Managers 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 ILFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ILFS Investment Managers has no effect on the direction of Nippon Life i.e., Nippon Life and ILFS Investment go up and down completely randomly.

Pair Corralation between Nippon Life and ILFS Investment

Assuming the 90 days trading horizon Nippon Life India is expected to generate 1.06 times more return on investment than ILFS Investment. However, Nippon Life is 1.06 times more volatile than ILFS Investment Managers. It trades about 0.03 of its potential returns per unit of risk. ILFS Investment Managers is currently generating about -0.05 per unit of risk. If you would invest  67,643  in Nippon Life India on August 31, 2024 and sell it today you would earn a total of  1,462  from holding Nippon Life India or generate 2.16% return on investment over 90 days.

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

Nippon Life India  vs.  ILFS Investment Managers

Nippon Life India

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 2 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ILFS Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ILFS Investment Managers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Nippon Life and ILFS Investment

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

The idea behind Nippon Life India and ILFS Investment Managers 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.