Correlation Between NMDC and Mold Tek

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

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

Diversification Opportunities for NMDC and Mold Tek

-0.35

Correlation Coefficient

NMDC  Mold Tek

Very good diversification

The 3 months correlation between NMDC and Mold is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Mold Tek Packaging Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mold Tek Packaging and NMDC 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 NMDC Limited are associated (or correlated) with Mold Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mold Tek Packaging has no effect on the direction of NMDC i.e., NMDC and Mold Tek go up and down completely randomly.

Pair Corralation between NMDC and Mold Tek

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.3 times more return on investment than Mold Tek. However, NMDC is 1.3 times more volatile than Mold Tek Packaging Limited. It trades about 0.11 of its potential returns per unit of risk. Mold Tek Packaging Limited is currently generating about -0.13 per unit of risk. If you would invest  20,949  in NMDC Limited on September 10, 2024 and sell it today you would earn a total of  2,917  from holding NMDC Limited or generate 13.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

NMDC Limited  vs.  Mold Tek Packaging Limited

NMDC Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mold Tek Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mold Tek Packaging Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NMDC and Mold Tek

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

The idea behind NMDC Limited and Mold Tek Packaging 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..