Correlation Between NMDC Steel and Hisar Metal

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

Diversification Opportunities for NMDC Steel and Hisar Metal

0.83

Correlation Coefficient

NMDC Steel  Hisar Metal

Very poor diversification

The 3 months correlation between NMDC and Hisar is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Hisar Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisar Metal Industries 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 Hisar Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisar Metal Industries has no effect on the direction of NMDC Steel i.e., NMDC Steel and Hisar Metal go up and down completely randomly.

Pair Corralation between NMDC Steel and Hisar Metal

Assuming the 90 days trading horizon NMDC Steel Limited is expected to under-perform the Hisar Metal. But the stock apears to be less risky and, when comparing its historical volatility, NMDC Steel Limited is 1.18 times less risky than Hisar Metal. The stock trades about -0.11 of its potential returns per unit of risk. The Hisar Metal Industries is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  19,419  in Hisar Metal Industries on September 1, 2024 and sell it today you would lose (2,173) from holding Hisar Metal Industries or give up 11.19% of portfolio value over 90 days.

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

NMDC Steel Limited  vs.  Hisar Metal Industries

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 December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Hisar Metal Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hisar Metal Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with NMDC Steel and Hisar Metal

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

The idea behind NMDC Steel Limited and Hisar Metal Industries 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.