Correlation Between Eros International and Nazara Technologies

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

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

Diversification Opportunities for Eros International and Nazara Technologies

-0.33

Correlation Coefficient

Eros International  Nazara Technologies

Very good diversification

The 3 months correlation between Eros and Nazara is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eros International Media and Nazara Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nazara Technologies and Eros International 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 Eros International Media 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 Eros International i.e., Eros International and Nazara Technologies go up and down completely randomly.

Pair Corralation between Eros International and Nazara Technologies

Assuming the 90 days trading horizon Eros International Media is expected to under-perform the Nazara Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Eros International Media is 1.04 times less risky than Nazara Technologies. The stock trades about -0.1 of its potential returns per unit of risk. The Nazara Technologies Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  102,135  in Nazara Technologies Limited on September 29, 2024 and sell it today you would earn a total of  530.00  from holding Nazara Technologies Limited or generate 0.52% return on investment over 90 days.

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

Eros International Media  vs.  Nazara Technologies Limited

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media 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 fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nazara Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nazara Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eros International and Nazara Technologies

The main advantage of trading using opposite Eros International and Nazara Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eros International 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 Eros International Media 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.