Correlation Between Maithan Alloys and Nazara Technologies

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

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

Diversification Opportunities for Maithan Alloys and Nazara Technologies

0.7

Correlation Coefficient

Maithan Alloys  Nazara Technologies

Poor diversification

The 3 months correlation between Maithan and Nazara is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys 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 Maithan Alloys 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 Maithan Alloys 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 Maithan Alloys i.e., Maithan Alloys and Nazara Technologies go up and down completely randomly.

Pair Corralation between Maithan Alloys and Nazara Technologies

Assuming the 90 days trading horizon Maithan Alloys Limited is expected to under-perform the Nazara Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Maithan Alloys Limited is 1.12 times less risky than Nazara Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The Nazara Technologies Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  98,475  in Nazara Technologies Limited on September 28, 2024 and sell it today you would earn a total of  4,190  from holding Nazara Technologies Limited or generate 4.25% return on investment over 90 days.

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

Maithan Alloys Limited  vs.  Nazara Technologies Limited

Maithan Alloys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maithan Alloys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Maithan Alloys is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Nazara Technologies

Risk-Adjusted Performance

3 of 100

Weak

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 Maithan Alloys and Nazara Technologies

The main advantage of trading using opposite Maithan Alloys and Nazara Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maithan Alloys 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 Maithan Alloys 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.