Correlation Between Punjab Chemicals and NMDC

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

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

Diversification Opportunities for Punjab Chemicals and NMDC

0.0

Correlation Coefficient

Punjab Chemicals  NMDC

Pay attention - limited upside

The 3 months correlation between Punjab and NMDC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Punjab Chemicals Crop and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Punjab Chemicals 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 Punjab Chemicals Crop 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 Punjab Chemicals i.e., Punjab Chemicals and NMDC go up and down completely randomly.

Pair Corralation between Punjab Chemicals and NMDC

Assuming the 90 days trading horizon Punjab Chemicals Crop is expected to generate 1.47 times more return on investment than NMDC. However, Punjab Chemicals is 1.47 times more volatile than NMDC Limited. It trades about 0.14 of its potential returns per unit of risk. NMDC Limited is currently generating about -0.08 per unit of risk. If you would invest  99,490  in Punjab Chemicals Crop on September 23, 2024 and sell it today you would earn a total of  7,640  from holding Punjab Chemicals Crop or generate 7.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Punjab Chemicals Crop  vs.  NMDC Limited

Punjab Chemicals Crop

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Punjab Chemicals Crop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NMDC Limited

Risk-Adjusted Performance

0 of 100

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Punjab Chemicals and NMDC

The main advantage of trading using opposite Punjab Chemicals and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Punjab Chemicals 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 Punjab Chemicals Crop 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.