Correlation Between NMDC and APL Apollo

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

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

Diversification Opportunities for NMDC and APL Apollo

0.59

Correlation Coefficient

NMDC  APL Apollo

Very weak diversification

The 3 months correlation between NMDC and APL is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and APL Apollo Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APL Apollo Tubes and NMDC 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 NMDC Limited are associated (or correlated) with APL Apollo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APL Apollo Tubes has no effect on the direction of NMDC i.e., NMDC and APL Apollo go up and down completely randomly.

Pair Corralation between NMDC and APL Apollo

Assuming the 90 days trading horizon NMDC Limited is expected to under-perform the APL Apollo. In addition to that, NMDC is 1.08 times more volatile than APL Apollo Tubes. It trades about -0.13 of its total potential returns per unit of risk. APL Apollo Tubes is currently generating about -0.02 per unit of volatility. If you would invest  150,685  in APL Apollo Tubes on December 1, 2024 and sell it today you would lose (6,790) from holding APL Apollo Tubes or give up 4.51% of portfolio value over 90 days.

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

NMDC Limited  vs.  APL Apollo Tubes

NMDC Limited

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

APL Apollo Tubes

Risk-Adjusted Performance

Very Weak

Over the last 90 days APL Apollo Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, APL Apollo is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with NMDC and APL Apollo

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

The idea behind NMDC Limited and APL Apollo Tubes 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.