Correlation Between Hilton Metal and NMDC

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

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

Diversification Opportunities for Hilton Metal and NMDC

0.14

Correlation Coefficient

Hilton Metal  NMDC

Average diversification

The 3 months correlation between Hilton and NMDC is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Hilton Metal 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 Hilton Metal Forging 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 Hilton Metal i.e., Hilton Metal and NMDC go up and down completely randomly.

Pair Corralation between Hilton Metal and NMDC

Assuming the 90 days trading horizon Hilton Metal Forging is expected to under-perform the NMDC. But the stock apears to be less risky and, when comparing its historical volatility, Hilton Metal Forging is 6.34 times less risky than NMDC. The stock trades about -0.01 of its potential returns per unit of risk. The NMDC Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,610  in NMDC Limited on October 5, 2024 and sell it today you would earn a total of  2,156  from holding NMDC Limited or generate 46.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.67%
Values	Daily Returns

Hilton Metal Forging  vs.  NMDC Limited

Hilton Metal Forging

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

NMDC Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 5 (%) 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 Hilton Metal and NMDC

The main advantage of trading using opposite Hilton Metal and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Metal 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 Hilton Metal Forging 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.