Correlation Between NMDC and Shaily Engineering

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

By analyzing existing cross correlation between NMDC Limited and Shaily Engineering Plastics, you can compare the effects of market volatilities on NMDC and Shaily Engineering 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 Shaily Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC and Shaily Engineering.

Diversification Opportunities for NMDC and Shaily Engineering

0.22

Correlation Coefficient

NMDC  Shaily Engineering

Modest diversification

The 3 months correlation between NMDC and Shaily is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Shaily Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaily Engineering 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 Shaily Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaily Engineering has no effect on the direction of NMDC i.e., NMDC and Shaily Engineering go up and down completely randomly.

Pair Corralation between NMDC and Shaily Engineering

Assuming the 90 days trading horizon NMDC is expected to generate 5.66 times less return on investment than Shaily Engineering. But when comparing it to its historical volatility, NMDC Limited is 8.36 times less risky than Shaily Engineering. It trades about 0.08 of its potential returns per unit of risk. Shaily Engineering Plastics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  34,529  in Shaily Engineering Plastics on September 3, 2024 and sell it today you would earn a total of  95,206  from holding Shaily Engineering Plastics or generate 275.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

NMDC Limited  vs.  Shaily Engineering Plastics

NMDC Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shaily Engineering

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMDC and Shaily Engineering

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

The idea behind NMDC Limited and Shaily Engineering Plastics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.