Correlation Between NMDC Steel and LLOYDS METALS

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

Diversification Opportunities for NMDC Steel and LLOYDS METALS

-0.59

Correlation Coefficient

NMDC Steel  LLOYDS METALS

Excellent diversification

The 3 months correlation between NMDC and LLOYDS is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and LLOYDS METALS AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LLOYDS METALS AND 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 LLOYDS METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LLOYDS METALS AND has no effect on the direction of NMDC Steel i.e., NMDC Steel and LLOYDS METALS go up and down completely randomly.

Pair Corralation between NMDC Steel and LLOYDS METALS

Assuming the 90 days trading horizon NMDC Steel Limited is expected to under-perform the LLOYDS METALS. But the stock apears to be less risky and, when comparing its historical volatility, NMDC Steel Limited is 1.41 times less risky than LLOYDS METALS. The stock trades about -0.07 of its potential returns per unit of risk. The LLOYDS METALS AND is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  97,285  in LLOYDS METALS AND on September 1, 2024 and sell it today you would earn a total of  6,665  from holding LLOYDS METALS AND or generate 6.85% return on investment over 90 days.

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

NMDC Steel Limited  vs.  LLOYDS METALS AND

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.

LLOYDS METALS AND

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LLOYDS METALS AND are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, LLOYDS METALS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMDC Steel and LLOYDS METALS

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

The idea behind NMDC Steel Limited and LLOYDS METALS AND 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.