Correlation Between NMDC and Hisar Metal

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

By analyzing existing cross correlation between NMDC Limited and Hisar Metal Industries, you can compare the effects of market volatilities on NMDC and Hisar Metal 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 Hisar Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC and Hisar Metal.

Diversification Opportunities for NMDC and Hisar Metal

0.0

Correlation Coefficient

NMDC  Hisar Metal

Pay attention - limited upside

The 3 months correlation between NMDC and Hisar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Hisar Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisar Metal Industries 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 Hisar Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisar Metal Industries has no effect on the direction of NMDC i.e., NMDC and Hisar Metal go up and down completely randomly.

Pair Corralation between NMDC and Hisar Metal

Assuming the 90 days trading horizon NMDC Limited is expected to generate 0.93 times more return on investment than Hisar Metal. However, NMDC Limited is 1.07 times less risky than Hisar Metal. It trades about 0.05 of its potential returns per unit of risk. Hisar Metal Industries is currently generating about -0.09 per unit of risk. If you would invest  21,493  in NMDC Limited on August 31, 2024 and sell it today you would earn a total of  1,280  from holding NMDC Limited or generate 5.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

NMDC Limited  vs.  Hisar Metal Industries

NMDC Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Hisar Metal Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hisar Metal Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NMDC and Hisar Metal

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

The idea behind NMDC Limited and Hisar Metal Industries 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.