Correlation Between Nahar Industrial and Golden Tobacco

Can any of the company-specific risk be diversified away by investing in both Nahar Industrial and Golden Tobacco 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 Golden Tobacco 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 Golden Tobacco Limited, you can compare the effects of market volatilities on Nahar Industrial and Golden Tobacco 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 Golden Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nahar Industrial and Golden Tobacco.

Diversification Opportunities for Nahar Industrial and Golden Tobacco

0.65

Correlation Coefficient

Nahar Industrial  Golden Tobacco

Poor diversification

The 3 months correlation between Nahar and Golden is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nahar Industrial Enterprises and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco 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 Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of Nahar Industrial i.e., Nahar Industrial and Golden Tobacco go up and down completely randomly.

Pair Corralation between Nahar Industrial and Golden Tobacco

Assuming the 90 days trading horizon Nahar Industrial Enterprises is expected to under-perform the Golden Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, Nahar Industrial Enterprises is 1.19 times less risky than Golden Tobacco. The stock trades about -0.01 of its potential returns per unit of risk. The Golden Tobacco Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,700  in Golden Tobacco Limited on October 23, 2024 and sell it today you would earn a total of  240.00  from holding Golden Tobacco Limited or generate 6.49% return on investment over 90 days.

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

Nahar Industrial Enterprises  vs.  Golden Tobacco 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 latest stock price disarray, may contribute to short-term losses for the investors.

Golden Tobacco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Tobacco Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Golden Tobacco may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nahar Industrial and Golden Tobacco

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

The idea behind Nahar Industrial Enterprises and Golden Tobacco 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.