Correlation Between Indo Borax and NMDC

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

Diversification Opportunities for Indo Borax and NMDC

0.81

Correlation Coefficient

Indo Borax  NMDC

Very poor diversification

The 3 months correlation between Indo and NMDC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC 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 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 Indo Borax i.e., Indo Borax and NMDC go up and down completely randomly.

Pair Corralation between Indo Borax and NMDC

Assuming the 90 days trading horizon Indo Borax Chemicals is expected to under-perform the NMDC. In addition to that, Indo Borax is 1.1 times more volatile than NMDC Limited. It trades about -0.03 of its total potential returns per unit of risk. NMDC Limited is currently generating about 0.0 per unit of volatility. If you would invest  6,844  in NMDC Limited on December 24, 2024 and sell it today you would lose (93.00) from holding NMDC Limited or give up 1.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Indo Borax Chemicals  vs.  NMDC Limited

Indo Borax Chemicals

Risk-Adjusted Performance

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

NMDC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days NMDC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NMDC is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Indo Borax and NMDC

The main advantage of trading using opposite Indo Borax and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indo Borax 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 Indo Borax Chemicals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.