Correlation Between PI Industries and NMDC

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

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

Diversification Opportunities for PI Industries and NMDC

0.65

Correlation Coefficient

PI Industries  NMDC

Poor diversification

The 3 months correlation between PIIND and NMDC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PI Industries Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and PI Industries 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 PI Industries Limited are associated (or correlated) with NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of PI Industries i.e., PI Industries and NMDC go up and down completely randomly.

Pair Corralation between PI Industries and NMDC

Assuming the 90 days trading horizon PI Industries Limited is expected to under-perform the NMDC. But the stock apears to be less risky and, when comparing its historical volatility, PI Industries Limited is 1.41 times less risky than NMDC. The stock trades about -0.07 of its potential returns per unit of risk. The NMDC Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,896  in NMDC Limited on December 22, 2024 and sell it today you would lose (145.00) from holding NMDC Limited or give up 2.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

PI Industries Limited  vs.  NMDC Limited

PI Industries Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days PI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

NMDC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days NMDC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NMDC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PI Industries and NMDC

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

The idea behind PI Industries Limited and NMDC 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.