Correlation Between NMDC Steel and Agro Tech

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

By analyzing existing cross correlation between NMDC Steel Limited and Agro Tech Foods, you can compare the effects of market volatilities on NMDC Steel and Agro Tech 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 Steel with a short position of Agro Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC Steel and Agro Tech.

Diversification Opportunities for NMDC Steel and Agro Tech

0.71

Correlation Coefficient

NMDC Steel  Agro Tech

Poor diversification

The 3 months correlation between NMDC and Agro is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and NMDC Steel 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 Steel Limited are associated (or correlated) with Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of NMDC Steel i.e., NMDC Steel and Agro Tech go up and down completely randomly.

Pair Corralation between NMDC Steel and Agro Tech

Assuming the 90 days trading horizon NMDC Steel Limited is expected to under-perform the Agro Tech. In addition to that, NMDC Steel is 1.51 times more volatile than Agro Tech Foods. It trades about -0.13 of its total potential returns per unit of risk. Agro Tech Foods is currently generating about -0.16 per unit of volatility. If you would invest  92,405  in Agro Tech Foods on December 31, 2024 and sell it today you would lose (16,940) from holding Agro Tech Foods or give up 18.33% of portfolio value over 90 days.

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

NMDC Steel Limited  vs.  Agro Tech Foods

NMDC Steel Limited

Risk-Adjusted Performance

Very Weak

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

Agro Tech Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agro Tech Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with NMDC Steel and Agro Tech

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

The idea behind NMDC Steel Limited and Agro Tech Foods 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.