Correlation Between NMDC and Welspun Corp

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

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

Diversification Opportunities for NMDC and Welspun Corp

0.1

Correlation Coefficient

NMDC  Welspun Corp

Average diversification

The 3 months correlation between NMDC and Welspun is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Welspun Corp Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welspun Corp 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 Welspun Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welspun Corp Limited has no effect on the direction of NMDC i.e., NMDC and Welspun Corp go up and down completely randomly.

Pair Corralation between NMDC and Welspun Corp

Assuming the 90 days trading horizon NMDC Limited is expected to generate 11.54 times more return on investment than Welspun Corp. However, NMDC is 11.54 times more volatile than Welspun Corp Limited. It trades about 0.07 of its potential returns per unit of risk. Welspun Corp Limited is currently generating about 0.07 per unit of risk. If you would invest  7,520  in NMDC Limited on October 20, 2024 and sell it today you would lose (857.00) from holding NMDC Limited or give up 11.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NMDC Limited  vs.  Welspun Corp 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 uncertain basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Welspun Corp Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Welspun Corp Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Welspun Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NMDC and Welspun Corp

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

The idea behind NMDC Limited and Welspun Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.