Correlation Between NMDC and Mahamaya Steel

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

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

Diversification Opportunities for NMDC and Mahamaya Steel

0.32

Correlation Coefficient

NMDC  Mahamaya Steel

Weak diversification

The 3 months correlation between NMDC and Mahamaya is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Mahamaya Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahamaya Steel 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 Mahamaya Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahamaya Steel Industries has no effect on the direction of NMDC i.e., NMDC and Mahamaya Steel go up and down completely randomly.

Pair Corralation between NMDC and Mahamaya Steel

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.02 times more return on investment than Mahamaya Steel. However, NMDC is 1.02 times more volatile than Mahamaya Steel Industries. It trades about 0.08 of its potential returns per unit of risk. Mahamaya Steel Industries is currently generating about -0.01 per unit of risk. If you would invest  21,918  in NMDC Limited on September 13, 2024 and sell it today you would earn a total of  2,161  from holding NMDC Limited or generate 9.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

NMDC Limited  vs.  Mahamaya Steel Industries

NMDC Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mahamaya Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mahamaya Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mahamaya Steel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NMDC and Mahamaya Steel

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

The idea behind NMDC Limited and Mahamaya Steel 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.