Correlation Between Rail Vikas and NBCC

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

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

Diversification Opportunities for Rail Vikas and NBCC

0.88

Correlation Coefficient

Rail Vikas  NBCC

Very poor diversification

The 3 months correlation between Rail and NBCC is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Rail Vikas Nigam and NBCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCC Limited and Rail Vikas 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 Rail Vikas Nigam are associated (or correlated) with NBCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBCC Limited has no effect on the direction of Rail Vikas i.e., Rail Vikas and NBCC go up and down completely randomly.

Pair Corralation between Rail Vikas and NBCC

Assuming the 90 days trading horizon Rail Vikas is expected to generate 1.03 times less return on investment than NBCC. But when comparing it to its historical volatility, Rail Vikas Nigam is 1.66 times less risky than NBCC. It trades about 0.12 of its potential returns per unit of risk. NBCC Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,276  in NBCC Limited on October 5, 2024 and sell it today you would earn a total of  7,059  from holding NBCC Limited or generate 310.15% return on investment over 90 days.

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

Rail Vikas Nigam  vs.  NBCC Limited

Rail Vikas Nigam

Risk-Adjusted Performance

0 of 100

Very Weak

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

NBCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Rail Vikas and NBCC

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

The idea behind Rail Vikas Nigam and NBCC 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.