Correlation Between NMDC Steel and Kohinoor Foods

Can any of the company-specific risk be diversified away by investing in both NMDC Steel and Kohinoor Foods 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 Kohinoor Foods 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 Kohinoor Foods Limited, you can compare the effects of market volatilities on NMDC Steel and Kohinoor Foods 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 Kohinoor Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC Steel and Kohinoor Foods.

Diversification Opportunities for NMDC Steel and Kohinoor Foods

0.29

Correlation Coefficient

NMDC Steel  Kohinoor Foods

Modest diversification

The 3 months correlation between NMDC and Kohinoor is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Kohinoor Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohinoor 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 Kohinoor Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohinoor Foods has no effect on the direction of NMDC Steel i.e., NMDC Steel and Kohinoor Foods go up and down completely randomly.

Pair Corralation between NMDC Steel and Kohinoor Foods

Assuming the 90 days trading horizon NMDC Steel Limited is expected to under-perform the Kohinoor Foods. But the stock apears to be less risky and, when comparing its historical volatility, NMDC Steel Limited is 1.46 times less risky than Kohinoor Foods. The stock trades about -0.04 of its potential returns per unit of risk. The Kohinoor Foods Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,093  in Kohinoor Foods Limited on October 23, 2024 and sell it today you would lose (56.00) from holding Kohinoor Foods Limited or give up 1.37% of portfolio value over 90 days.

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

NMDC Steel Limited  vs.  Kohinoor Foods Limited

NMDC Steel Limited

Risk-Adjusted Performance

0 of 100

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 relatively invariable forward indicators, NMDC Steel is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Kohinoor Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohinoor Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Kohinoor Foods is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NMDC Steel and Kohinoor Foods

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

The idea behind NMDC Steel Limited and Kohinoor Foods 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.