Correlation Between Rico Auto and Nahar Industrial

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

By analyzing existing cross correlation between Rico Auto Industries and Nahar Industrial Enterprises, you can compare the effects of market volatilities on Rico Auto and Nahar Industrial 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 Rico Auto with a short position of Nahar Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rico Auto and Nahar Industrial.

Diversification Opportunities for Rico Auto and Nahar Industrial

0.93

Correlation Coefficient

Rico Auto  Nahar Industrial

Almost no diversification

The 3 months correlation between Rico and Nahar is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Nahar Industrial Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nahar Industrial Ent and Rico Auto 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 Rico Auto Industries are associated (or correlated) with Nahar Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nahar Industrial Ent has no effect on the direction of Rico Auto i.e., Rico Auto and Nahar Industrial go up and down completely randomly.

Pair Corralation between Rico Auto and Nahar Industrial

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the Nahar Industrial. In addition to that, Rico Auto is 1.25 times more volatile than Nahar Industrial Enterprises. It trades about -0.17 of its total potential returns per unit of risk. Nahar Industrial Enterprises is currently generating about -0.08 per unit of volatility. If you would invest  15,603  in Nahar Industrial Enterprises on September 2, 2024 and sell it today you would lose (1,607) from holding Nahar Industrial Enterprises or give up 10.3% of portfolio value over 90 days.

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

Rico Auto Industries  vs.  Nahar Industrial Enterprises

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Nahar Industrial Ent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nahar Industrial Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Rico Auto and Nahar Industrial

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

The idea behind Rico Auto Industries and Nahar Industrial Enterprises 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.