Correlation Between JGCHEMICALS and NMDC Steel

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

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

Diversification Opportunities for JGCHEMICALS and NMDC Steel

-0.13

Correlation Coefficient

JGCHEMICALS  NMDC Steel

Good diversification

The 3 months correlation between JGCHEMICALS and NMDC is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED and NMDC Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Steel Limited and JGCHEMICALS 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 JGCHEMICALS LIMITED are associated (or correlated) with NMDC Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Steel Limited has no effect on the direction of JGCHEMICALS i.e., JGCHEMICALS and NMDC Steel go up and down completely randomly.

Pair Corralation between JGCHEMICALS and NMDC Steel

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to generate 1.26 times more return on investment than NMDC Steel. However, JGCHEMICALS is 1.26 times more volatile than NMDC Steel Limited. It trades about -0.16 of its potential returns per unit of risk. NMDC Steel Limited is currently generating about -0.32 per unit of risk. If you would invest  43,710  in JGCHEMICALS LIMITED on October 7, 2024 and sell it today you would lose (3,020) from holding JGCHEMICALS LIMITED or give up 6.91% of portfolio value over 90 days.

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

JGCHEMICALS LIMITED  vs.  NMDC Steel Limited

JGCHEMICALS LIMITED

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical indicators, JGCHEMICALS sustained solid returns over the last few months and may actually be approaching a breakup point.

NMDC Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMDC Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with JGCHEMICALS and NMDC Steel

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

The idea behind JGCHEMICALS LIMITED and NMDC Steel 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.