Correlation Between NMDC Steel and Orissa Minerals

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

Diversification Opportunities for NMDC Steel and Orissa Minerals

0.57

Correlation Coefficient

NMDC Steel  Orissa Minerals

Very weak diversification

The 3 months correlation between NMDC and Orissa is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and The Orissa Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orissa Minerals 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 Orissa Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orissa Minerals has no effect on the direction of NMDC Steel i.e., NMDC Steel and Orissa Minerals go up and down completely randomly.

Pair Corralation between NMDC Steel and Orissa Minerals

Assuming the 90 days trading horizon NMDC Steel Limited is expected to under-perform the Orissa Minerals. But the stock apears to be less risky and, when comparing its historical volatility, NMDC Steel Limited is 1.26 times less risky than Orissa Minerals. The stock trades about -0.14 of its potential returns per unit of risk. The The Orissa Minerals is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  793,925  in The Orissa Minerals on September 4, 2024 and sell it today you would lose (11,560) from holding The Orissa Minerals or give up 1.46% of portfolio value over 90 days.

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

NMDC Steel Limited  vs.  The Orissa Minerals

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 weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Orissa Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NMDC Steel and Orissa Minerals

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

The idea behind NMDC Steel Limited and The Orissa Minerals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.