Correlation Between Gillette India and NBCC

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

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

Diversification Opportunities for Gillette India and NBCC

-0.44

Correlation Coefficient

Gillette India  NBCC

Very good diversification

The 3 months correlation between Gillette and NBCC is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gillette India Limited and NBCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCC Limited and Gillette India 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 Gillette India Limited 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 Gillette India i.e., Gillette India and NBCC go up and down completely randomly.

Pair Corralation between Gillette India and NBCC

Assuming the 90 days trading horizon Gillette India Limited is expected to generate 1.07 times more return on investment than NBCC. However, Gillette India is 1.07 times more volatile than NBCC Limited. It trades about 0.05 of its potential returns per unit of risk. NBCC Limited is currently generating about -0.13 per unit of risk. If you would invest  877,916  in Gillette India Limited on September 23, 2024 and sell it today you would earn a total of  63,524  from holding Gillette India Limited or generate 7.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gillette India Limited  vs.  NBCC Limited

Gillette India

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gillette India Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Gillette India may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gillette India and NBCC

The main advantage of trading using opposite Gillette India and NBCC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gillette India 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 Gillette India Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.