Correlation Between Nahar Industrial and Ratnamani Metals

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Can any of the company-specific risk be diversified away by investing in both Nahar Industrial and Ratnamani Metals 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 Nahar Industrial and Ratnamani Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nahar Industrial Enterprises and Ratnamani Metals Tubes, you can compare the effects of market volatilities on Nahar Industrial and Ratnamani Metals 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 Nahar Industrial with a short position of Ratnamani Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nahar Industrial and Ratnamani Metals.

Diversification Opportunities for Nahar Industrial and Ratnamani Metals

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nahar and Ratnamani is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nahar Industrial Enterprises and Ratnamani Metals Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratnamani Metals Tubes and Nahar 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 Nahar Industrial Enterprises are associated (or correlated) with Ratnamani Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratnamani Metals Tubes has no effect on the direction of Nahar Industrial i.e., Nahar Industrial and Ratnamani Metals go up and down completely randomly.

Pair Corralation between Nahar Industrial and Ratnamani Metals

Assuming the 90 days trading horizon Nahar Industrial Enterprises is expected to generate 1.74 times more return on investment than Ratnamani Metals. However, Nahar Industrial is 1.74 times more volatile than Ratnamani Metals Tubes. It trades about 0.04 of its potential returns per unit of risk. Ratnamani Metals Tubes is currently generating about 0.02 per unit of risk. If you would invest  12,070  in Nahar Industrial Enterprises on August 29, 2024 and sell it today you would earn a total of  1,156  from holding Nahar Industrial Enterprises or generate 9.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nahar Industrial Enterprises  vs.  Ratnamani Metals Tubes

 Performance 
       Timeline  
Nahar Industrial Ent 

Risk-Adjusted Performance

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Weak
 
Strong
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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Ratnamani Metals Tubes 

Risk-Adjusted Performance

0 of 100

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

Nahar Industrial and Ratnamani Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nahar Industrial and Ratnamani Metals

The main advantage of trading using opposite Nahar Industrial and Ratnamani Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nahar Industrial position performs unexpectedly, Ratnamani Metals 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 Ratnamani Metals will offset losses from the drop in Ratnamani Metals' long position.
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The idea behind Nahar Industrial Enterprises and Ratnamani Metals Tubes 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 Stocks Directory module to find actively traded stocks across global markets.

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