Correlation Between Home First and Nahar Industrial

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

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

Diversification Opportunities for Home First and Nahar Industrial

0.14

Correlation Coefficient

Home First  Nahar Industrial

Average diversification

The 3 months correlation between Home and Nahar is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Home First Finance 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 Home First 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 Home First Finance 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 Home First i.e., Home First and Nahar Industrial go up and down completely randomly.

Pair Corralation between Home First and Nahar Industrial

Assuming the 90 days trading horizon Home First Finance is expected to under-perform the Nahar Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Home First Finance is 1.3 times less risky than Nahar Industrial. The stock trades about -0.35 of its potential returns per unit of risk. The Nahar Industrial Enterprises is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  13,225  in Nahar Industrial Enterprises on September 25, 2024 and sell it today you would earn a total of  1,070  from holding Nahar Industrial Enterprises or generate 8.09% return on investment over 90 days.

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

Home First Finance  vs.  Nahar Industrial Enterprises

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 Home First and Nahar Industrial

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

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.