Correlation Between Garware Hi and NMDC

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

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

Diversification Opportunities for Garware Hi and NMDC

0.53

Correlation Coefficient

Garware Hi  NMDC

Very weak diversification

The 3 months correlation between Garware and NMDC is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Garware Hi 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 Garware Hi Tech Films are associated (or correlated) with NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of Garware Hi i.e., Garware Hi and NMDC go up and down completely randomly.

Pair Corralation between Garware Hi and NMDC

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to generate 1.76 times more return on investment than NMDC. However, Garware Hi is 1.76 times more volatile than NMDC Limited. It trades about 0.24 of its potential returns per unit of risk. NMDC Limited is currently generating about 0.11 per unit of risk. If you would invest  318,577  in Garware Hi Tech Films on September 12, 2024 and sell it today you would earn a total of  204,088  from holding Garware Hi Tech Films or generate 64.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Garware Hi Tech Films  vs.  NMDC Limited

Garware Hi Tech

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

NMDC Limited

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garware Hi and NMDC

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

The idea behind Garware Hi Tech Films and NMDC 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.