Correlation Between NMDC Steel and Sportking India

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

Diversification Opportunities for NMDC Steel and Sportking India

0.56

Correlation Coefficient

NMDC Steel  Sportking India

Very weak diversification

The 3 months correlation between NMDC and Sportking is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Sportking India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportking India 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 Sportking India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportking India has no effect on the direction of NMDC Steel i.e., NMDC Steel and Sportking India go up and down completely randomly.

Pair Corralation between NMDC Steel and Sportking India

Assuming the 90 days trading horizon NMDC Steel is expected to generate 5.38 times less return on investment than Sportking India. But when comparing it to its historical volatility, NMDC Steel Limited is 1.48 times less risky than Sportking India. It trades about 0.1 of its potential returns per unit of risk. Sportking India Limited is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  9,327  in Sportking India Limited on September 25, 2024 and sell it today you would earn a total of  2,022  from holding Sportking India Limited or generate 21.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

NMDC Steel Limited  vs.  Sportking India 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 latest unfluctuating performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Sportking India

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sportking India Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Sportking India is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NMDC Steel and Sportking India

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

The idea behind NMDC Steel Limited and Sportking India 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..