Correlation Between Bodal Chemicals and NMDC

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

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

Diversification Opportunities for Bodal Chemicals and NMDC

0.36

Correlation Coefficient

Bodal Chemicals  NMDC

Weak diversification

The 3 months correlation between Bodal and NMDC is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bodal Chemicals Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Bodal 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 Bodal Chemicals 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 Bodal Chemicals i.e., Bodal Chemicals and NMDC go up and down completely randomly.

Pair Corralation between Bodal Chemicals and NMDC

Assuming the 90 days trading horizon Bodal Chemicals Limited is expected to under-perform the NMDC. But the stock apears to be less risky and, when comparing its historical volatility, Bodal Chemicals Limited is 1.08 times less risky than NMDC. The stock trades about -0.11 of its potential returns per unit of risk. The NMDC Limited is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  23,429  in NMDC Limited on September 26, 2024 and sell it today you would lose (2,185) from holding NMDC Limited or give up 9.33% of portfolio value over 90 days.

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

Bodal Chemicals Limited  vs.  NMDC Limited

Bodal Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodal Chemicals Limited 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 technical 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

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bodal Chemicals and NMDC

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

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.