Correlation Between Nazara Technologies and JM Financial

Can any of the company-specific risk be diversified away by investing in both Nazara Technologies and JM Financial 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 Nazara Technologies and JM Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nazara Technologies Limited and JM Financial Limited, you can compare the effects of market volatilities on Nazara Technologies and JM Financial 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 Nazara Technologies with a short position of JM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nazara Technologies and JM Financial.

Diversification Opportunities for Nazara Technologies and JM Financial

-0.16

Correlation Coefficient

Nazara Technologies  JM Financial

Good diversification

The 3 months correlation between Nazara and JMFINANCIL is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nazara Technologies Limited and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial Limited and Nazara Technologies 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 Nazara Technologies Limited are associated (or correlated) with JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Nazara Technologies i.e., Nazara Technologies and JM Financial go up and down completely randomly.

Pair Corralation between Nazara Technologies and JM Financial

Assuming the 90 days trading horizon Nazara Technologies Limited is expected to generate 1.2 times more return on investment than JM Financial. However, Nazara Technologies is 1.2 times more volatile than JM Financial Limited. It trades about 0.1 of its potential returns per unit of risk. JM Financial Limited is currently generating about -0.21 per unit of risk. If you would invest  99,080  in Nazara Technologies Limited on September 28, 2024 and sell it today you would earn a total of  3,585  from holding Nazara Technologies Limited or generate 3.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Nazara Technologies Limited  vs.  JM Financial Limited

Nazara Technologies

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nazara Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

JM Financial Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JM Financial Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nazara Technologies and JM Financial

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

The idea behind Nazara Technologies Limited and JM Financial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.