Correlation Between NMDC Steel and Kalyani Steels

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

Diversification Opportunities for NMDC Steel and Kalyani Steels

0.35

Correlation Coefficient

NMDC Steel  Kalyani Steels

Weak diversification

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

Pair Corralation between NMDC Steel and Kalyani Steels

Assuming the 90 days trading horizon NMDC Steel Limited is expected to under-perform the Kalyani Steels. But the stock apears to be less risky and, when comparing its historical volatility, NMDC Steel Limited is 1.22 times less risky than Kalyani Steels. The stock trades about -0.11 of its potential returns per unit of risk. The Kalyani Steels Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  75,720  in Kalyani Steels Limited on September 3, 2024 and sell it today you would earn a total of  14,515  from holding Kalyani Steels Limited or generate 19.17% return on investment over 90 days.

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

NMDC Steel Limited  vs.  Kalyani Steels 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 unfluctuating 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.

Kalyani Steels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMDC Steel and Kalyani Steels

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

The idea behind NMDC Steel Limited and Kalyani Steels 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.