Correlation Between REC and Nazara Technologies

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

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

Diversification Opportunities for REC and Nazara Technologies

0.37

Correlation Coefficient

REC  Nazara Technologies

Weak diversification

The 3 months correlation between REC and Nazara is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding REC Limited and Nazara Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nazara Technologies and REC 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 REC Limited are associated (or correlated) with Nazara Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nazara Technologies has no effect on the direction of REC i.e., REC and Nazara Technologies go up and down completely randomly.

Pair Corralation between REC and Nazara Technologies

Assuming the 90 days trading horizon REC Limited is expected to under-perform the Nazara Technologies. In addition to that, REC is 1.14 times more volatile than Nazara Technologies Limited. It trades about -0.19 of its total potential returns per unit of risk. Nazara Technologies Limited is currently generating about -0.08 per unit of volatility. If you would invest  104,540  in Nazara Technologies Limited on October 10, 2024 and sell it today you would lose (3,325) from holding Nazara Technologies Limited or give up 3.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

REC Limited  vs.  Nazara Technologies Limited

REC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, REC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nazara Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Nazara Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with REC and Nazara Technologies

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

The idea behind REC Limited and Nazara 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.