Correlation Between Malu Paper and NCC

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

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

Diversification Opportunities for Malu Paper and NCC

0.81

Correlation Coefficient

Malu Paper  NCC

Very poor diversification

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

Pair Corralation between Malu Paper and NCC

Assuming the 90 days trading horizon Malu Paper Mills is expected to under-perform the NCC. But the stock apears to be less risky and, when comparing its historical volatility, Malu Paper Mills is 1.22 times less risky than NCC. The stock trades about -0.14 of its potential returns per unit of risk. The NCC Limited is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  27,390  in NCC Limited on December 31, 2024 and sell it today you would lose (6,442) from holding NCC Limited or give up 23.52% of portfolio value over 90 days.

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

Malu Paper Mills  vs.  NCC Limited

Malu Paper Mills

Risk-Adjusted Performance

Very Weak

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

NCC Limited

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Malu Paper and NCC

The main advantage of trading using opposite Malu Paper and NCC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malu Paper 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 Malu Paper Mills 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 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.