Correlation Between NMDC Steel and Zuari Agro

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

Diversification Opportunities for NMDC Steel and Zuari Agro

-0.26

Correlation Coefficient

NMDC Steel  Zuari Agro

Very good diversification

The 3 months correlation between NMDC and Zuari is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Zuari Agro Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zuari Agro Chemicals 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 Zuari Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zuari Agro Chemicals has no effect on the direction of NMDC Steel i.e., NMDC Steel and Zuari Agro go up and down completely randomly.

Pair Corralation between NMDC Steel and Zuari Agro

Assuming the 90 days trading horizon NMDC Steel is expected to generate 1.05 times less return on investment than Zuari Agro. But when comparing it to its historical volatility, NMDC Steel Limited is 1.04 times less risky than Zuari Agro. It trades about 0.04 of its potential returns per unit of risk. Zuari Agro Chemicals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  16,595  in Zuari Agro Chemicals on September 19, 2024 and sell it today you would earn a total of  7,783  from holding Zuari Agro Chemicals or generate 46.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.21%
Values	Daily Returns

NMDC Steel Limited  vs.  Zuari Agro Chemicals

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 weak 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.

Zuari Agro Chemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zuari Agro Chemicals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Zuari Agro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMDC Steel and Zuari Agro

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

The idea behind NMDC Steel Limited and Zuari Agro Chemicals 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.