Correlation Between Shyam Metalics and NMDC Steel

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

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

Diversification Opportunities for Shyam Metalics and NMDC Steel

0.89

Correlation Coefficient

Shyam Metalics  NMDC Steel

Very poor diversification

The 3 months correlation between Shyam and NMDC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Shyam Metalics and and NMDC Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Steel Limited and Shyam Metalics 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 Shyam Metalics and are associated (or correlated) with NMDC Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Steel Limited has no effect on the direction of Shyam Metalics i.e., Shyam Metalics and NMDC Steel go up and down completely randomly.

Pair Corralation between Shyam Metalics and NMDC Steel

Assuming the 90 days trading horizon Shyam Metalics and is expected to under-perform the NMDC Steel. But the stock apears to be less risky and, when comparing its historical volatility, Shyam Metalics and is 1.1 times less risky than NMDC Steel. The stock trades about -0.27 of its potential returns per unit of risk. The NMDC Steel Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,426  in NMDC Steel Limited on September 25, 2024 and sell it today you would earn a total of  64.00  from holding NMDC Steel Limited or generate 1.45% return on investment over 90 days.

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

Shyam Metalics and  vs.  NMDC Steel Limited

Shyam Metalics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shyam Metalics and 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Shyam Metalics and NMDC Steel

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

The idea behind Shyam Metalics and and NMDC Steel 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.