Correlation Between Coffee Day and Nazara Technologies

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

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

Diversification Opportunities for Coffee Day and Nazara Technologies

0.01

Correlation Coefficient

Coffee Day  Nazara Technologies

Significant diversification

The 3 months correlation between Coffee and Nazara is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Day Enterprises and Nazara Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nazara Technologies and Coffee Day 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 Coffee Day Enterprises 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 Coffee Day i.e., Coffee Day and Nazara Technologies go up and down completely randomly.

Pair Corralation between Coffee Day and Nazara Technologies

Assuming the 90 days trading horizon Coffee Day Enterprises is expected to under-perform the Nazara Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Coffee Day Enterprises is 1.02 times less risky than Nazara Technologies. The stock trades about -0.47 of its potential returns per unit of risk. The Nazara Technologies Limited is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  89,870  in Nazara Technologies Limited on September 12, 2024 and sell it today you would earn a total of  11,635  from holding Nazara Technologies Limited or generate 12.95% return on investment over 90 days.

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

Coffee Day Enterprises  vs.  Nazara Technologies Limited

Coffee Day Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coffee Day 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nazara Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Coffee Day and Nazara Technologies

The main advantage of trading using opposite Coffee Day and Nazara Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coffee Day 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 Coffee Day Enterprises 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.