Correlation Between Nahar Industrial and HCL Technologies

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

Diversification Opportunities for Nahar Industrial and HCL Technologies

0.92

Correlation Coefficient

Nahar Industrial  HCL Technologies

Almost no diversification

The 3 months correlation between Nahar and HCL is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nahar Industrial Enterprises and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies 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 HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of Nahar Industrial i.e., Nahar Industrial and HCL Technologies go up and down completely randomly.

Pair Corralation between Nahar Industrial and HCL Technologies

Assuming the 90 days trading horizon Nahar Industrial Enterprises is expected to under-perform the HCL Technologies. In addition to that, Nahar Industrial is 1.41 times more volatile than HCL Technologies Limited. It trades about -0.21 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about -0.13 per unit of volatility. If you would invest  190,075  in HCL Technologies Limited on December 26, 2024 and sell it today you would lose (27,585) from holding HCL Technologies Limited or give up 14.51% of portfolio value over 90 days.

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

Nahar Industrial Enterprises  vs.  HCL Technologies Limited

Nahar Industrial Ent

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

HCL Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCL Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Nahar Industrial and HCL Technologies

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

The idea behind Nahar Industrial Enterprises and HCL 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.