Correlation Between Aarey Drugs and Nazara Technologies

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

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

Diversification Opportunities for Aarey Drugs and Nazara Technologies

0.56

Correlation Coefficient

Aarey Drugs  Nazara Technologies

Very weak diversification

The 3 months correlation between Aarey and Nazara is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aarey Drugs Pharmaceuticals and Nazara Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nazara Technologies and Aarey Drugs 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 Aarey Drugs Pharmaceuticals 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 Aarey Drugs i.e., Aarey Drugs and Nazara Technologies go up and down completely randomly.

Pair Corralation between Aarey Drugs and Nazara Technologies

Assuming the 90 days trading horizon Aarey Drugs is expected to generate 1.64 times less return on investment than Nazara Technologies. In addition to that, Aarey Drugs is 1.25 times more volatile than Nazara Technologies Limited. It trades about 0.15 of its total potential returns per unit of risk. Nazara Technologies Limited is currently generating about 0.31 per unit of volatility. If you would invest  100,035  in Nazara Technologies Limited on April 25, 2025 and sell it today you would earn a total of  41,645  from holding Nazara Technologies Limited or generate 41.63% return on investment over 90 days.

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

Aarey Drugs Pharmaceuticals  vs.  Nazara Technologies Limited

Aarey Drugs Pharmace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aarey Drugs Pharmaceuticals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Aarey Drugs reported solid returns over the last few months and may actually be approaching a breakup point.

Nazara Technologies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Nazara Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aarey Drugs and Nazara Technologies

The main advantage of trading using opposite Aarey Drugs and Nazara Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarey Drugs 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 Aarey Drugs Pharmaceuticals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.