Correlation Between Nippon Life and JBM Auto

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

Diversification Opportunities for Nippon Life and JBM Auto

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Nippon and JBM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Life India and JBM Auto Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBM Auto Limited 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 JBM Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBM Auto Limited has no effect on the direction of Nippon Life i.e., Nippon Life and JBM Auto go up and down completely randomly.

Pair Corralation between Nippon Life and JBM Auto

Assuming the 90 days trading horizon Nippon Life India is expected to generate 0.94 times more return on investment than JBM Auto. However, Nippon Life India is 1.07 times less risky than JBM Auto. It trades about -0.01 of its potential returns per unit of risk. JBM Auto Limited is currently generating about -0.08 per unit of risk. If you would invest  60,648  in Nippon Life India on November 28, 2024 and sell it today you would lose (6,873) from holding Nippon Life India or give up 11.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.92%
ValuesDaily Returns

Nippon Life India  vs.  JBM Auto Limited

 Performance 
       Timeline  
Nippon Life India 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JBM Auto Limited 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days JBM Auto Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Nippon Life and JBM Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nippon Life and JBM Auto

The main advantage of trading using opposite Nippon Life and JBM Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Life position performs unexpectedly, JBM Auto 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 JBM Auto will offset losses from the drop in JBM Auto's long position.
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The idea behind Nippon Life India and JBM Auto 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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