Correlation Between Indo Borax and NBCC

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

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

Diversification Opportunities for Indo Borax and NBCC

0.73

Correlation Coefficient

Indo Borax  NBCC

Poor diversification

The 3 months correlation between Indo and NBCC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and NBCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCC Limited and Indo Borax 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 Indo Borax Chemicals 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 Indo Borax i.e., Indo Borax and NBCC go up and down completely randomly.

Pair Corralation between Indo Borax and NBCC

Assuming the 90 days trading horizon Indo Borax is expected to generate 4.43 times less return on investment than NBCC. But when comparing it to its historical volatility, Indo Borax Chemicals is 2.12 times less risky than NBCC. It trades about 0.04 of its potential returns per unit of risk. NBCC Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,276  in NBCC Limited on October 5, 2024 and sell it today you would earn a total of  7,059  from holding NBCC Limited or generate 310.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Indo Borax Chemicals  vs.  NBCC Limited

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Indo Borax and NBCC

The main advantage of trading using opposite Indo Borax and NBCC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indo Borax 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 Indo Borax Chemicals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.