Correlation Between NBCC and Praj Industries

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

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

Diversification Opportunities for NBCC and Praj Industries

0.35

Correlation Coefficient

NBCC  Praj Industries

Weak diversification

The 3 months correlation between NBCC and Praj is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding NBCC Limited and Praj Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praj Industries and NBCC 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 NBCC Limited are associated (or correlated) with Praj Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praj Industries has no effect on the direction of NBCC i.e., NBCC and Praj Industries go up and down completely randomly.

Pair Corralation between NBCC and Praj Industries

Assuming the 90 days trading horizon NBCC Limited is expected to under-perform the Praj Industries. In addition to that, NBCC is 1.1 times more volatile than Praj Industries Limited. It trades about -0.05 of its total potential returns per unit of risk. Praj Industries Limited is currently generating about 0.05 per unit of volatility. If you would invest  70,670  in Praj Industries Limited on October 20, 2024 and sell it today you would earn a total of  8,995  from holding Praj Industries Limited or generate 12.73% return on investment over 90 days.

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

NBCC Limited  vs.  Praj Industries Limited

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 comparatively stable basic indicators, NBCC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Praj Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Praj Industries Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Praj Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NBCC and Praj Industries

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

The idea behind NBCC Limited and Praj Industries 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.