Correlation Between Indo Borax and NCC

Can any of the company-specific risk be diversified away by investing in both Indo Borax and NCC 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 NCC 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 NCC Limited, you can compare the effects of market volatilities on Indo Borax and NCC 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 NCC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Borax and NCC.

Diversification Opportunities for Indo Borax and NCC

0.69

Correlation Coefficient

Indo Borax  NCC

Poor diversification

The 3 months correlation between Indo and NCC is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and NCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCC 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 NCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCC Limited has no effect on the direction of Indo Borax i.e., Indo Borax and NCC go up and down completely randomly.

Pair Corralation between Indo Borax and NCC

Assuming the 90 days trading horizon Indo Borax is expected to generate 3.04 times less return on investment than NCC. In addition to that, Indo Borax is 1.01 times more volatile than NCC Limited. It trades about 0.02 of its total potential returns per unit of risk. NCC Limited is currently generating about 0.07 per unit of volatility. If you would invest  17,519  in NCC Limited on October 5, 2024 and sell it today you would earn a total of  9,871  from holding NCC Limited or generate 56.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

Indo Borax Chemicals  vs.  NCC 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.

NCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Indo Borax and NCC

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

The idea behind Indo Borax Chemicals and NCC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.