Correlation Between NMDC and PI Industries

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

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

Diversification Opportunities for NMDC and PI Industries

0.65

Correlation Coefficient

NMDC  PI Industries

Poor diversification

The 3 months correlation between NMDC and PIIND is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and PI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Industries 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 PI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Industries Limited has no effect on the direction of NMDC i.e., NMDC and PI Industries go up and down completely randomly.

Pair Corralation between NMDC and PI Industries

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.41 times more return on investment than PI Industries. However, NMDC is 1.41 times more volatile than PI Industries Limited. It trades about 0.0 of its potential returns per unit of risk. PI Industries Limited is currently generating about -0.07 per unit of risk. If you would invest  6,896  in NMDC Limited on December 22, 2024 and sell it today you would lose (145.00) from holding NMDC Limited or give up 2.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

NMDC Limited  vs.  PI Industries Limited

NMDC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days NMDC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NMDC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

PI Industries Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days PI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NMDC and PI Industries

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

The idea behind NMDC Limited and PI Industries 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.