Correlation Between Nahar Industrial and COSMO FIRST

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

By analyzing existing cross correlation between Nahar Industrial Enterprises and COSMO FIRST LIMITED, you can compare the effects of market volatilities on Nahar Industrial and COSMO FIRST 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 Nahar Industrial with a short position of COSMO FIRST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nahar Industrial and COSMO FIRST.

Diversification Opportunities for Nahar Industrial and COSMO FIRST

0.52

Correlation Coefficient

Nahar Industrial  COSMO FIRST

Very weak diversification

The 3 months correlation between Nahar and COSMO is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nahar Industrial Enterprises and COSMO FIRST LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSMO FIRST LIMITED and Nahar Industrial 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 Nahar Industrial Enterprises are associated (or correlated) with COSMO FIRST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSMO FIRST LIMITED has no effect on the direction of Nahar Industrial i.e., Nahar Industrial and COSMO FIRST go up and down completely randomly.

Pair Corralation between Nahar Industrial and COSMO FIRST

Assuming the 90 days trading horizon Nahar Industrial Enterprises is expected to generate 1.12 times more return on investment than COSMO FIRST. However, Nahar Industrial is 1.12 times more volatile than COSMO FIRST LIMITED. It trades about 0.03 of its potential returns per unit of risk. COSMO FIRST LIMITED is currently generating about 0.03 per unit of risk. If you would invest  10,800  in Nahar Industrial Enterprises on October 4, 2024 and sell it today you would earn a total of  2,902  from holding Nahar Industrial Enterprises or generate 26.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Nahar Industrial Enterprises  vs.  COSMO FIRST LIMITED

Nahar Industrial Ent

Risk-Adjusted Performance

0 of 100

Very Weak

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

COSMO FIRST LIMITED

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nahar Industrial and COSMO FIRST

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

The idea behind Nahar Industrial Enterprises and COSMO FIRST 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.