Correlation Between NMDC and Prakash Steelage

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

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

Diversification Opportunities for NMDC and Prakash Steelage

0.5

Correlation Coefficient

NMDC  Prakash Steelage

Very weak diversification

The 3 months correlation between NMDC and Prakash is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Prakash Steelage Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prakash Steelage 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 Prakash Steelage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prakash Steelage has no effect on the direction of NMDC i.e., NMDC and Prakash Steelage go up and down completely randomly.

Pair Corralation between NMDC and Prakash Steelage

Assuming the 90 days trading horizon NMDC is expected to generate 1.02 times less return on investment than Prakash Steelage. But when comparing it to its historical volatility, NMDC Limited is 1.52 times less risky than Prakash Steelage. It trades about 0.07 of its potential returns per unit of risk. Prakash Steelage Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  495.00  in Prakash Steelage Limited on September 26, 2024 and sell it today you would earn a total of  330.00  from holding Prakash Steelage Limited or generate 66.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

NMDC Limited  vs.  Prakash Steelage Limited

NMDC Limited

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Prakash Steelage is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NMDC and Prakash Steelage

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

The idea behind NMDC Limited and Prakash Steelage 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.