Correlation Between NMDC Steel and Bharti Airtel

Can any of the company-specific risk be diversified away by investing in both NMDC Steel and Bharti Airtel 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 Bharti Airtel 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 Bharti Airtel Limited, you can compare the effects of market volatilities on NMDC Steel and Bharti Airtel 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 Bharti Airtel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC Steel and Bharti Airtel.

Diversification Opportunities for NMDC Steel and Bharti Airtel

0.6

Correlation Coefficient

NMDC Steel  Bharti Airtel

Poor diversification

The 3 months correlation between NMDC and Bharti is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Bharti Airtel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bharti Airtel Limited 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 Bharti Airtel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bharti Airtel Limited has no effect on the direction of NMDC Steel i.e., NMDC Steel and Bharti Airtel go up and down completely randomly.

Pair Corralation between NMDC Steel and Bharti Airtel

Assuming the 90 days trading horizon NMDC Steel Limited is expected to under-perform the Bharti Airtel. In addition to that, NMDC Steel is 1.46 times more volatile than Bharti Airtel Limited. It trades about -0.1 of its total potential returns per unit of risk. Bharti Airtel Limited is currently generating about 0.04 per unit of volatility. If you would invest  163,545  in Bharti Airtel Limited on September 15, 2024 and sell it today you would earn a total of  4,630  from holding Bharti Airtel Limited or generate 2.83% return on investment over 90 days.

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

NMDC Steel Limited  vs.  Bharti Airtel Limited

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.

Bharti Airtel Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bharti Airtel Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bharti Airtel is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NMDC Steel and Bharti Airtel

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

The idea behind NMDC Steel Limited and Bharti Airtel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.