Correlation Between Engineers India and N B

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

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

Diversification Opportunities for Engineers India and N B

0.17

Correlation Coefficient

Engineers India  N B

Average diversification

The 3 months correlation between Engineers and NBIFIN is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Engineers India Limited and N B I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N B I and Engineers India 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 Engineers India Limited are associated (or correlated) with N B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N B I has no effect on the direction of Engineers India i.e., Engineers India and N B go up and down completely randomly.

Pair Corralation between Engineers India and N B

Assuming the 90 days trading horizon Engineers India Limited is expected to generate 1.35 times more return on investment than N B. However, Engineers India is 1.35 times more volatile than N B I. It trades about 0.07 of its potential returns per unit of risk. N B I is currently generating about 0.08 per unit of risk. If you would invest  7,632  in Engineers India Limited on September 23, 2024 and sell it today you would earn a total of  10,736  from holding Engineers India Limited or generate 140.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Engineers India Limited  vs.  N B I

Engineers India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engineers India Limited 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.

N B I

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in N B I are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, N B sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Engineers India and N B

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

The idea behind Engineers India Limited and N B I 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.