Correlation Between NCC and Praj Industries

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

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

Diversification Opportunities for NCC and Praj Industries

0.35

Correlation Coefficient

NCC  Praj Industries

Weak diversification

The 3 months correlation between NCC and Praj is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding NCC 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 NCC 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 NCC 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 NCC i.e., NCC and Praj Industries go up and down completely randomly.

Pair Corralation between NCC and Praj Industries

Assuming the 90 days trading horizon NCC Limited is expected to generate 1.19 times more return on investment than Praj Industries. However, NCC is 1.19 times more volatile than Praj Industries Limited. It trades about 0.09 of its potential returns per unit of risk. Praj Industries Limited is currently generating about 0.09 per unit of risk. If you would invest  9,241  in NCC Limited on October 5, 2024 and sell it today you would earn a total of  18,149  from holding NCC Limited or generate 196.4% return on investment over 90 days.

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

NCC Limited  vs.  Praj Industries Limited

NCC Limited

Risk-Adjusted Performance

0 of 100

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 latest unsteady 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.

Praj Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Praj Industries Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Praj Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NCC and Praj Industries

The main advantage of trading using opposite NCC and Praj Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NCC 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 NCC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.