Correlation Between Gujarat Fluorochemicals and Nazara Technologies

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

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

Diversification Opportunities for Gujarat Fluorochemicals and Nazara Technologies

-0.05

Correlation Coefficient

Gujarat Fluorochemicals  Nazara Technologies

Good diversification

The 3 months correlation between Gujarat and Nazara is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and Nazara Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nazara Technologies and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals 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 Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Nazara Technologies go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Nazara Technologies

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to generate 1.26 times more return on investment than Nazara Technologies. However, Gujarat Fluorochemicals is 1.26 times more volatile than Nazara Technologies Limited. It trades about 0.11 of its potential returns per unit of risk. Nazara Technologies Limited is currently generating about -0.04 per unit of risk. If you would invest  406,280  in Gujarat Fluorochemicals Limited on October 5, 2024 and sell it today you would earn a total of  17,015  from holding Gujarat Fluorochemicals Limited or generate 4.19% return on investment over 90 days.

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

Gujarat Fluorochemicals Limite  vs.  Nazara Technologies Limited

Gujarat Fluorochemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Gujarat Fluorochemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nazara Technologies

Risk-Adjusted Performance

7 of 100

Insignificant

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 unfluctuating basic indicators, Nazara Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gujarat Fluorochemicals and Nazara Technologies

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

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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.