Correlation Between NMDC and Jai Balaji

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

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

Diversification Opportunities for NMDC and Jai Balaji

-0.07

Correlation Coefficient

NMDC  Jai Balaji

Good diversification

The 3 months correlation between NMDC and Jai is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Jai Balaji Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jai Balaji 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 Jai Balaji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jai Balaji Industries has no effect on the direction of NMDC i.e., NMDC and Jai Balaji go up and down completely randomly.

Pair Corralation between NMDC and Jai Balaji

Assuming the 90 days trading horizon NMDC Limited is expected to generate 7.53 times more return on investment than Jai Balaji. However, NMDC is 7.53 times more volatile than Jai Balaji Industries. It trades about 0.07 of its potential returns per unit of risk. Jai Balaji Industries is currently generating about 0.2 per unit of risk. If you would invest  3,525  in NMDC Limited on October 5, 2024 and sell it today you would earn a total of  3,244  from holding NMDC Limited or generate 92.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.97%
Values	Daily Returns

NMDC Limited  vs.  Jai Balaji Industries

NMDC Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Jai Balaji Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jai Balaji Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NMDC and Jai Balaji

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

The idea behind NMDC Limited and Jai Balaji 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.