Correlation Between Nahar Industrial and Xchanging Solutions

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

Diversification Opportunities for Nahar Industrial and Xchanging Solutions

0.95

Correlation Coefficient

Nahar Industrial  Xchanging Solutions

Almost no diversification

The 3 months correlation between Nahar and Xchanging is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Nahar Industrial Enterprises and Xchanging Solutions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xchanging Solutions 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 Xchanging Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xchanging Solutions has no effect on the direction of Nahar Industrial i.e., Nahar Industrial and Xchanging Solutions go up and down completely randomly.

Pair Corralation between Nahar Industrial and Xchanging Solutions

Assuming the 90 days trading horizon Nahar Industrial Enterprises is expected to generate 0.97 times more return on investment than Xchanging Solutions. However, Nahar Industrial Enterprises is 1.03 times less risky than Xchanging Solutions. It trades about -0.08 of its potential returns per unit of risk. Xchanging Solutions Limited is currently generating about -0.1 per unit of risk. If you would invest  15,508  in Nahar Industrial Enterprises on September 3, 2024 and sell it today you would lose (1,512) from holding Nahar Industrial Enterprises or give up 9.75% 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.  Xchanging Solutions 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 latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Xchanging Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xchanging Solutions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Nahar Industrial and Xchanging Solutions

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

The idea behind Nahar Industrial Enterprises and Xchanging Solutions 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.