Correlation Between NMDC and KIOCL

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

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

Diversification Opportunities for NMDC and KIOCL

-0.24

Correlation Coefficient

NMDC  KIOCL

Very good diversification

The 3 months correlation between NMDC and KIOCL is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited 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 KIOCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIOCL Limited has no effect on the direction of NMDC i.e., NMDC and KIOCL go up and down completely randomly.

Pair Corralation between NMDC and KIOCL

Assuming the 90 days trading horizon NMDC Limited is expected to generate 0.68 times more return on investment than KIOCL. However, NMDC Limited is 1.46 times less risky than KIOCL. It trades about 0.05 of its potential returns per unit of risk. KIOCL Limited is currently generating about -0.14 per unit of risk. If you would invest  6,464  in NMDC Limited on December 30, 2024 and sell it today you would earn a total of  425.00  from holding NMDC Limited or generate 6.57% return on investment over 90 days.

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

NMDC Limited  vs.  KIOCL Limited

NMDC Limited

Risk-Adjusted Performance

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 unsteady basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KIOCL Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days KIOCL Limited 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 very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NMDC and KIOCL

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

The idea behind NMDC Limited and KIOCL 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.