Correlation Between NMDC and Manali Petrochemicals

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

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

Diversification Opportunities for NMDC and Manali Petrochemicals

-0.01

Correlation Coefficient

NMDC  Manali Petrochemicals

Good diversification

The 3 months correlation between NMDC and Manali is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Manali Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manali Petrochemicals 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 Manali Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manali Petrochemicals has no effect on the direction of NMDC i.e., NMDC and Manali Petrochemicals go up and down completely randomly.

Pair Corralation between NMDC and Manali Petrochemicals

Assuming the 90 days trading horizon NMDC Limited is expected to generate 25.34 times more return on investment than Manali Petrochemicals. However, NMDC is 25.34 times more volatile than Manali Petrochemicals Limited. It trades about 0.12 of its potential returns per unit of risk. Manali Petrochemicals Limited is currently generating about -0.18 per unit of risk. If you would invest  8,051  in NMDC Limited on October 9, 2024 and sell it today you would lose (1,454) from holding NMDC Limited or give up 18.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

NMDC Limited  vs.  Manali Petrochemicals Limited

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 unfluctuating basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Manali Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manali Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NMDC and Manali Petrochemicals

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

The idea behind NMDC Limited and Manali Petrochemicals 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 Transaction History module to view history of all your transactions and understand their impact on performance.