Correlation Between Jindal Stainless and NMDC

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

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

Diversification Opportunities for Jindal Stainless and NMDC

0.24

Correlation Coefficient

Jindal Stainless  NMDC

Modest diversification

The 3 months correlation between Jindal and NMDC is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Stainless Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Jindal Stainless 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 Jindal Stainless Limited 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 Jindal Stainless i.e., Jindal Stainless and NMDC go up and down completely randomly.

Pair Corralation between Jindal Stainless and NMDC

Assuming the 90 days trading horizon Jindal Stainless Limited is expected to generate 0.99 times more return on investment than NMDC. However, Jindal Stainless Limited is 1.01 times less risky than NMDC. It trades about -0.03 of its potential returns per unit of risk. NMDC Limited is currently generating about -0.05 per unit of risk. If you would invest  80,831  in Jindal Stainless Limited on September 27, 2024 and sell it today you would lose (7,446) from holding Jindal Stainless Limited or give up 9.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Jindal Stainless Limited  vs.  NMDC Limited

Jindal Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Stainless Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Jindal Stainless is not utilizing all of its potentials. The newest 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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Jindal Stainless and NMDC

The main advantage of trading using opposite Jindal Stainless and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jindal Stainless 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 Jindal Stainless Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.