Correlation Between NMDC and Surya Roshni

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

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

Diversification Opportunities for NMDC and Surya Roshni

-0.01

Correlation Coefficient

NMDC  Surya Roshni

Good diversification

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

Pair Corralation between NMDC and Surya Roshni

Assuming the 90 days trading horizon NMDC Limited is expected to generate 7.88 times more return on investment than Surya Roshni. However, NMDC is 7.88 times more volatile than Surya Roshni Limited. It trades about 0.13 of its potential returns per unit of risk. Surya Roshni Limited is currently generating about -0.02 per unit of risk. If you would invest  7,135  in NMDC Limited on October 22, 2024 and sell it today you would lose (424.00) from holding NMDC Limited or give up 5.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

NMDC Limited  vs.  Surya Roshni 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.

Surya Roshni Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Surya Roshni Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Surya Roshni displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMDC and Surya Roshni

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

The idea behind NMDC Limited and Surya Roshni 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.