Correlation Between Thermax and Nazara Technologies

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

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

Diversification Opportunities for Thermax and Nazara Technologies

-0.43

Correlation Coefficient

Thermax  Nazara Technologies

Very good diversification

The 3 months correlation between Thermax and Nazara is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Thermax 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 Thermax 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 Thermax 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 Thermax i.e., Thermax and Nazara Technologies go up and down completely randomly.

Pair Corralation between Thermax and Nazara Technologies

Assuming the 90 days trading horizon Thermax Limited is expected to under-perform the Nazara Technologies. In addition to that, Thermax is 1.03 times more volatile than Nazara Technologies Limited. It trades about -0.08 of its total potential returns per unit of risk. Nazara Technologies Limited is currently generating about 0.05 per unit of volatility. If you would invest  90,410  in Nazara Technologies Limited on October 25, 2024 and sell it today you would earn a total of  10,235  from holding Nazara Technologies Limited or generate 11.32% return on investment over 90 days.

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

Thermax Limited  vs.  Nazara Technologies Limited

Thermax Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermax Limited 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 primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nazara Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Nazara Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thermax and Nazara Technologies

The main advantage of trading using opposite Thermax and Nazara Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermax 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 Thermax 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 Transaction History module to view history of all your transactions and understand their impact on performance.