Correlation Between NMDC Steel and AUTHUM INVESTMENT

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

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

Diversification Opportunities for NMDC Steel and AUTHUM INVESTMENT

0.48

Correlation Coefficient

NMDC Steel  AUTHUM INVESTMENT

Very weak diversification

The 3 months correlation between NMDC and AUTHUM is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and AUTHUM INVESTMENT INFRASTRUCTU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTHUM INVESTMENT and NMDC Steel 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 Steel Limited are associated (or correlated) with AUTHUM INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTHUM INVESTMENT has no effect on the direction of NMDC Steel i.e., NMDC Steel and AUTHUM INVESTMENT go up and down completely randomly.

Pair Corralation between NMDC Steel and AUTHUM INVESTMENT

Assuming the 90 days trading horizon NMDC Steel Limited is expected to under-perform the AUTHUM INVESTMENT. But the stock apears to be less risky and, when comparing its historical volatility, NMDC Steel Limited is 1.32 times less risky than AUTHUM INVESTMENT. The stock trades about -0.14 of its potential returns per unit of risk. The AUTHUM INVESTMENT INFRASTRUCTU is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  166,160  in AUTHUM INVESTMENT INFRASTRUCTU on September 4, 2024 and sell it today you would lose (5,850) from holding AUTHUM INVESTMENT INFRASTRUCTU or give up 3.52% of portfolio value over 90 days.

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

NMDC Steel Limited  vs.  AUTHUM INVESTMENT INFRASTRUCTU

NMDC Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMDC Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's forward 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.

AUTHUM INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTHUM INVESTMENT INFRASTRUCTU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUTHUM INVESTMENT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NMDC Steel and AUTHUM INVESTMENT

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

The idea behind NMDC Steel Limited and AUTHUM INVESTMENT INFRASTRUCTU 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.