Correlation Between Nahar Industrial and Indian Energy

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

Diversification Opportunities for Nahar Industrial and Indian Energy

0.62

Correlation Coefficient

Nahar Industrial  Indian Energy

Poor diversification

The 3 months correlation between Nahar and Indian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nahar Industrial Enterprises and Indian Energy Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Energy Exchange 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 Indian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Energy Exchange has no effect on the direction of Nahar Industrial i.e., Nahar Industrial and Indian Energy go up and down completely randomly.

Pair Corralation between Nahar Industrial and Indian Energy

Assuming the 90 days trading horizon Nahar Industrial is expected to generate 1.36 times less return on investment than Indian Energy. In addition to that, Nahar Industrial is 1.28 times more volatile than Indian Energy Exchange. It trades about 0.01 of its total potential returns per unit of risk. Indian Energy Exchange is currently generating about 0.02 per unit of volatility. If you would invest  13,833  in Indian Energy Exchange on December 2, 2024 and sell it today you would earn a total of  1,760  from holding Indian Energy Exchange or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Nahar Industrial Enterprises  vs.  Indian Energy Exchange

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 uncertain 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.

Indian Energy Exchange

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indian Energy Exchange has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Nahar Industrial and Indian Energy

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

The idea behind Nahar Industrial Enterprises and Indian Energy Exchange 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.