Correlation Between State Bank and Nippon Life

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Can any of the company-specific risk be diversified away by investing in both State Bank 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 State Bank and Nippon Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Bank of and Nippon Life India, you can compare the effects of market volatilities on State Bank 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 State Bank with a short position of Nippon Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Nippon Life.

Diversification Opportunities for State Bank and Nippon Life

StateNipponDiversified AwayStateNipponDiversified Away100%
0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between State and Nippon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of 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 State Bank 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 State Bank of 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 State Bank i.e., State Bank and Nippon Life go up and down completely randomly.

Pair Corralation between State Bank and Nippon Life

Assuming the 90 days trading horizon State Bank is expected to generate 6.55 times less return on investment than Nippon Life. But when comparing it to its historical volatility, State Bank of is 1.66 times less risky than Nippon Life. It trades about 0.02 of its potential returns per unit of risk. Nippon Life India is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  64,429  in Nippon Life India on September 30, 2024 and sell it today you would earn a total of  8,696  from holding Nippon Life India or generate 13.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

State Bank of  vs.  Nippon Life India

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -505101520
JavaScript chart by amCharts 3.21.15SBIN NAM-INDIA
       Timeline  
State Bank 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15NovDecDec760780800820840860880
Nippon Life India 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Nippon Life exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecDec650700750800

State Bank and Nippon Life Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.0-3.75-2.49-1.240.011.242.53.765.02 0.050.100.15
JavaScript chart by amCharts 3.21.15SBIN NAM-INDIA
       Returns  

Pair Trading with State Bank and Nippon Life

The main advantage of trading using opposite State Bank and Nippon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank 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 State Bank of 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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