Correlation Between Nazara Technologies and Maithan Alloys

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

Diversification Opportunities for Nazara Technologies and Maithan Alloys

0.72

Correlation Coefficient

Nazara Technologies  Maithan Alloys

Poor diversification

The 3 months correlation between Nazara and Maithan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nazara Technologies Limited and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys 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 Maithan Alloys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maithan Alloys has no effect on the direction of Nazara Technologies i.e., Nazara Technologies and Maithan Alloys go up and down completely randomly.

Pair Corralation between Nazara Technologies and Maithan Alloys

Assuming the 90 days trading horizon Nazara Technologies is expected to generate 1.37 times less return on investment than Maithan Alloys. But when comparing it to its historical volatility, Nazara Technologies Limited is 1.46 times less risky than Maithan Alloys. It trades about 0.1 of its potential returns per unit of risk. Maithan Alloys Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  106,180  in Maithan Alloys Limited on September 28, 2024 and sell it today you would earn a total of  5,000  from holding Maithan Alloys Limited or generate 4.71% return on investment over 90 days.

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

Nazara Technologies Limited  vs.  Maithan Alloys 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Maithan Alloys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maithan Alloys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Maithan Alloys is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nazara Technologies and Maithan Alloys

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

The idea behind Nazara Technologies Limited and Maithan Alloys 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.