Correlation Between Nazara Technologies and NMDC

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

Diversification Opportunities for Nazara Technologies and NMDC

0.06

Correlation Coefficient

Nazara Technologies  NMDC

Significant diversification

The 3 months correlation between Nazara and NMDC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nazara Technologies Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC 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 NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of Nazara Technologies i.e., Nazara Technologies and NMDC go up and down completely randomly.

Pair Corralation between Nazara Technologies and NMDC

Assuming the 90 days trading horizon Nazara Technologies is expected to generate 15.15 times less return on investment than NMDC. But when comparing it to its historical volatility, Nazara Technologies Limited is 13.24 times less risky than NMDC. It trades about 0.06 of its potential returns per unit of risk. NMDC Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,789  in NMDC Limited on October 11, 2024 and sell it today you would lose (1,189) from holding NMDC Limited or give up 15.27% of portfolio value over 90 days.

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

Nazara Technologies Limited  vs.  NMDC Limited

Nazara Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nazara Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NMDC Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nazara Technologies and NMDC

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

The idea behind Nazara Technologies Limited and NMDC 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.