Correlation Between Electronics Mart and NMDC Steel

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

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

Diversification Opportunities for Electronics Mart and NMDC Steel

0.95

Correlation Coefficient

Electronics Mart  NMDC Steel

Almost no diversification

The 3 months correlation between Electronics and NMDC is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Electronics Mart India and NMDC Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Steel Limited and Electronics Mart 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 Electronics Mart India are associated (or correlated) with NMDC Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Steel Limited has no effect on the direction of Electronics Mart i.e., Electronics Mart and NMDC Steel go up and down completely randomly.

Pair Corralation between Electronics Mart and NMDC Steel

Assuming the 90 days trading horizon Electronics Mart India is expected to under-perform the NMDC Steel. But the stock apears to be less risky and, when comparing its historical volatility, Electronics Mart India is 1.1 times less risky than NMDC Steel. The stock trades about -0.2 of its potential returns per unit of risk. The NMDC Steel Limited is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  4,464  in NMDC Steel Limited on December 26, 2024 and sell it today you would lose (1,059) from holding NMDC Steel Limited or give up 23.72% of portfolio value over 90 days.

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

Electronics Mart India  vs.  NMDC Steel Limited

Electronics Mart India

Risk-Adjusted Performance

Very Weak

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

NMDC Steel Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Electronics Mart and NMDC Steel

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

The idea behind Electronics Mart India and NMDC Steel 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.