Correlation Between MRF and NBCC

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

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

Diversification Opportunities for MRF and NBCC

0.85

Correlation Coefficient

MRF  NBCC

Very poor diversification

The 3 months correlation between MRF and NBCC is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and NBCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCC Limited and MRF 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 MRF Limited are associated (or correlated) with NBCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBCC Limited has no effect on the direction of MRF i.e., MRF and NBCC go up and down completely randomly.

Pair Corralation between MRF and NBCC

Assuming the 90 days trading horizon MRF is expected to generate 2.18 times less return on investment than NBCC. But when comparing it to its historical volatility, MRF Limited is 2.08 times less risky than NBCC. It trades about 0.13 of its potential returns per unit of risk. NBCC Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,913  in NBCC Limited on September 23, 2024 and sell it today you would earn a total of  530.00  from holding NBCC Limited or generate 5.95% return on investment over 90 days.

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

MRF Limited  vs.  NBCC Limited

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NBCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MRF and NBCC

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

The idea behind MRF Limited and NBCC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.