Correlation Between STEEL EXCHANGE and Nazara Technologies

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

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

Diversification Opportunities for STEEL EXCHANGE and Nazara Technologies

0.2

Correlation Coefficient

STEEL EXCHANGE  Nazara Technologies

Modest diversification

The 3 months correlation between STEEL and Nazara is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and Nazara Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nazara Technologies and STEEL EXCHANGE 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 STEEL EXCHANGE INDIA 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 STEEL EXCHANGE i.e., STEEL EXCHANGE and Nazara Technologies go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and Nazara Technologies

Assuming the 90 days trading horizon STEEL EXCHANGE is expected to generate 2.23 times less return on investment than Nazara Technologies. But when comparing it to its historical volatility, STEEL EXCHANGE INDIA is 1.93 times less risky than Nazara Technologies. It trades about 0.1 of its potential returns per unit of risk. Nazara Technologies Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  94,800  in Nazara Technologies Limited on September 25, 2024 and sell it today you would earn a total of  4,780  from holding Nazara Technologies Limited or generate 5.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

STEEL EXCHANGE INDIA  vs.  Nazara Technologies Limited

STEEL EXCHANGE INDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL EXCHANGE INDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Nazara Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nazara Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with STEEL EXCHANGE and Nazara Technologies

The main advantage of trading using opposite STEEL EXCHANGE and Nazara Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL EXCHANGE 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 STEEL EXCHANGE INDIA 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.