Correlation Between Titan Company and Nahar Poly

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

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

Diversification Opportunities for Titan Company and Nahar Poly

0.09

Correlation Coefficient

Titan Company  Nahar Poly

Significant diversification

The 3 months correlation between Titan and Nahar is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and Nahar Poly Films in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nahar Poly Films and Titan Company 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 Titan Company Limited are associated (or correlated) with Nahar Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nahar Poly Films has no effect on the direction of Titan Company i.e., Titan Company and Nahar Poly go up and down completely randomly.

Pair Corralation between Titan Company and Nahar Poly

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the Nahar Poly. But the stock apears to be less risky and, when comparing its historical volatility, Titan Company Limited is 1.92 times less risky than Nahar Poly. The stock trades about -0.13 of its potential returns per unit of risk. The Nahar Poly Films is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  26,470  in Nahar Poly Films on September 5, 2024 and sell it today you would earn a total of  2,305  from holding Nahar Poly Films or generate 8.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Titan Company Limited  vs.  Nahar Poly Films

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Nahar Poly Films

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nahar Poly Films are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Nahar Poly may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Titan Company and Nahar Poly

The main advantage of trading using opposite Titan Company and Nahar Poly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Company position performs unexpectedly, Nahar Poly 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 Poly will offset losses from the drop in Nahar Poly's long position.

The idea behind Titan Company Limited and Nahar Poly Films 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.