Correlation Between Elgi Rubber and NBCC

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

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

Diversification Opportunities for Elgi Rubber and NBCC

-0.27

Correlation Coefficient

Elgi Rubber  NBCC

Very good diversification

The 3 months correlation between Elgi and NBCC is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Elgi Rubber and NBCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCC Limited and Elgi Rubber 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 Elgi Rubber are associated (or correlated) with NBCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBCC Limited has no effect on the direction of Elgi Rubber i.e., Elgi Rubber and NBCC go up and down completely randomly.

Pair Corralation between Elgi Rubber and NBCC

Assuming the 90 days trading horizon Elgi Rubber is expected to generate 3.06 times more return on investment than NBCC. However, Elgi Rubber is 3.06 times more volatile than NBCC Limited. It trades about 0.19 of its potential returns per unit of risk. NBCC Limited is currently generating about -0.04 per unit of risk. If you would invest  9,916  in Elgi Rubber on September 26, 2024 and sell it today you would earn a total of  1,820  from holding Elgi Rubber or generate 18.35% return on investment over 90 days.

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

Elgi Rubber  vs.  NBCC Limited

Elgi Rubber

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elgi Rubber are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Elgi Rubber sustained solid returns over the last few months and may actually be approaching a breakup point.

NBCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Elgi Rubber and NBCC

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

The idea behind Elgi Rubber and NBCC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.