Correlation Between Home First and NIIT

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

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

Diversification Opportunities for Home First and NIIT

-0.6

Correlation Coefficient

Home First  NIIT

Excellent diversification

The 3 months correlation between Home and NIIT is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Home First Finance and NIIT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIIT Limited and Home First 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 Home First Finance are associated (or correlated) with NIIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIIT Limited has no effect on the direction of Home First i.e., Home First and NIIT go up and down completely randomly.

Pair Corralation between Home First and NIIT

Assuming the 90 days trading horizon Home First Finance is expected to under-perform the NIIT. But the stock apears to be less risky and, when comparing its historical volatility, Home First Finance is 1.49 times less risky than NIIT. The stock trades about -0.08 of its potential returns per unit of risk. The NIIT Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18,108  in NIIT Limited on September 13, 2024 and sell it today you would earn a total of  3,472  from holding NIIT Limited or generate 19.17% return on investment over 90 days.

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

Home First Finance  vs.  NIIT Limited

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

NIIT Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NIIT Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, NIIT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home First and NIIT

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

The idea behind Home First Finance and NIIT 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 Stocks Directory module to find actively traded stocks across global markets.