Correlation Between STEEL EXCHANGE and NMDC

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

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

Diversification Opportunities for STEEL EXCHANGE and NMDC

-0.3

Correlation Coefficient

STEEL EXCHANGE  NMDC

Very good diversification

The 3 months correlation between STEEL and NMDC is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and STEEL EXCHANGE 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 STEEL EXCHANGE INDIA 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 STEEL EXCHANGE i.e., STEEL EXCHANGE and NMDC go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and NMDC

Assuming the 90 days trading horizon STEEL EXCHANGE is expected to generate 1.52 times less return on investment than NMDC. In addition to that, STEEL EXCHANGE is 1.1 times more volatile than NMDC Limited. It trades about 0.17 of its total potential returns per unit of risk. NMDC Limited is currently generating about 0.29 per unit of volatility. If you would invest  22,476  in NMDC Limited on September 13, 2024 and sell it today you would earn a total of  1,639  from holding NMDC Limited or generate 7.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

STEEL EXCHANGE INDIA  vs.  NMDC Limited

STEEL EXCHANGE INDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL EXCHANGE INDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

NMDC Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with STEEL EXCHANGE and NMDC

The main advantage of trading using opposite STEEL EXCHANGE and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL EXCHANGE 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 STEEL EXCHANGE INDIA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.