Correlation Between Bharti Airtel and Nazara Technologies

Can any of the company-specific risk be diversified away by investing in both Bharti Airtel and Nazara Technologies 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 Bharti Airtel and Nazara Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bharti Airtel Limited and Nazara Technologies Limited, you can compare the effects of market volatilities on Bharti Airtel and Nazara Technologies 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 Bharti Airtel with a short position of Nazara Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bharti Airtel and Nazara Technologies.

Diversification Opportunities for Bharti Airtel and Nazara Technologies

-0.18

Correlation Coefficient

Bharti Airtel  Nazara Technologies

Good diversification

The 3 months correlation between Bharti and Nazara is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bharti Airtel Limited and Nazara Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nazara Technologies and Bharti Airtel 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 Bharti Airtel Limited are associated (or correlated) with Nazara Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nazara Technologies has no effect on the direction of Bharti Airtel i.e., Bharti Airtel and Nazara Technologies go up and down completely randomly.

Pair Corralation between Bharti Airtel and Nazara Technologies

Assuming the 90 days trading horizon Bharti Airtel is expected to generate 17.21 times less return on investment than Nazara Technologies. But when comparing it to its historical volatility, Bharti Airtel Limited is 1.24 times less risky than Nazara Technologies. It trades about 0.01 of its potential returns per unit of risk. Nazara Technologies Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  94,795  in Nazara Technologies Limited on October 7, 2024 and sell it today you would earn a total of  6,615  from holding Nazara Technologies Limited or generate 6.98% return on investment over 90 days.

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

Bharti Airtel Limited  vs.  Nazara Technologies Limited

Bharti Airtel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharti Airtel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bharti Airtel is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Nazara Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nazara Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bharti Airtel and Nazara Technologies

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

The idea behind Bharti Airtel Limited and Nazara Technologies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.