Correlation Between NRB Industrial and HCL Technologies

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

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

Diversification Opportunities for NRB Industrial and HCL Technologies

-0.6

Correlation Coefficient

NRB Industrial  HCL Technologies

Excellent diversification

The 3 months correlation between NRB and HCL is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies and NRB 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 NRB Industrial Bearings are associated (or correlated) with HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of NRB Industrial i.e., NRB Industrial and HCL Technologies go up and down completely randomly.

Pair Corralation between NRB Industrial and HCL Technologies

Assuming the 90 days trading horizon NRB Industrial Bearings is expected to under-perform the HCL Technologies. In addition to that, NRB Industrial is 1.8 times more volatile than HCL Technologies Limited. It trades about -0.09 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about 0.09 per unit of volatility. If you would invest  190,990  in HCL Technologies Limited on October 8, 2024 and sell it today you would earn a total of  3,675  from holding HCL Technologies Limited or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

NRB Industrial Bearings  vs.  HCL Technologies Limited

NRB Industrial Bearings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRB Industrial Bearings 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

HCL Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCL Technologies Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, HCL Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NRB Industrial and HCL Technologies

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

The idea behind NRB Industrial Bearings and HCL Technologies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.