Correlation Between ILFS Investment and NMDC

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

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

Diversification Opportunities for ILFS Investment and NMDC

0.49

Correlation Coefficient

ILFS Investment  NMDC

Very weak diversification

The 3 months correlation between ILFS and NMDC is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ILFS Investment Managers and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and ILFS Investment 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 ILFS Investment Managers 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 ILFS Investment i.e., ILFS Investment and NMDC go up and down completely randomly.

Pair Corralation between ILFS Investment and NMDC

Assuming the 90 days trading horizon ILFS Investment Managers is expected to generate 1.35 times more return on investment than NMDC. However, ILFS Investment is 1.35 times more volatile than NMDC Limited. It trades about 0.04 of its potential returns per unit of risk. NMDC Limited is currently generating about 0.04 per unit of risk. If you would invest  910.00  in ILFS Investment Managers on September 23, 2024 and sell it today you would earn a total of  189.00  from holding ILFS Investment Managers or generate 20.77% return on investment over 90 days.

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

ILFS Investment Managers  vs.  NMDC Limited

ILFS Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ILFS Investment Managers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ILFS Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NMDC Limited

Risk-Adjusted Performance

0 of 100

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ILFS Investment and NMDC

The main advantage of trading using opposite ILFS Investment and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ILFS Investment 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 ILFS Investment Managers 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.