Correlation Between Associated Alcohols and Nahar Industrial

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

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

Diversification Opportunities for Associated Alcohols and Nahar Industrial

0.69

Correlation Coefficient

Associated Alcohols  Nahar Industrial

Poor diversification

The 3 months correlation between Associated and Nahar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries 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 Associated Alcohols 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 Associated Alcohols Breweries 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 Associated Alcohols i.e., Associated Alcohols and Nahar Industrial go up and down completely randomly.

Pair Corralation between Associated Alcohols and Nahar Industrial

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 1.22 times more return on investment than Nahar Industrial. However, Associated Alcohols is 1.22 times more volatile than Nahar Industrial Enterprises. It trades about 0.1 of its potential returns per unit of risk. Nahar Industrial Enterprises is currently generating about -0.03 per unit of risk. If you would invest  96,325  in Associated Alcohols Breweries on September 25, 2024 and sell it today you would earn a total of  13,970  from holding Associated Alcohols Breweries or generate 14.5% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  Nahar Industrial Enterprises

Associated Alcohols

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

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 very healthy fundamental indicators, Nahar Industrial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Associated Alcohols and Nahar Industrial

The main advantage of trading using opposite Associated Alcohols and Nahar Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Alcohols 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 Associated Alcohols Breweries 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.