Correlation Between NMDC and Kalyani Steels

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

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

Diversification Opportunities for NMDC and Kalyani Steels

0.07

Correlation Coefficient

NMDC  Kalyani Steels

Significant diversification

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

Pair Corralation between NMDC and Kalyani Steels

Assuming the 90 days trading horizon NMDC Limited is expected to generate 0.88 times more return on investment than Kalyani Steels. However, NMDC Limited is 1.14 times less risky than Kalyani Steels. It trades about 0.05 of its potential returns per unit of risk. Kalyani Steels Limited is currently generating about -0.2 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NMDC Limited  vs.  Kalyani Steels 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.

Kalyani Steels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kalyani Steels 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NMDC and Kalyani Steels

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

The idea behind NMDC Limited and Kalyani Steels 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.