Correlation Between NMDC Steel and Oil Natural

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

Diversification Opportunities for NMDC Steel and Oil Natural

0.91

Correlation Coefficient

NMDC Steel  Oil Natural

Almost no diversification

The 3 months correlation between NMDC and Oil is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Oil Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Natural Gas 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 Oil Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Natural Gas has no effect on the direction of NMDC Steel i.e., NMDC Steel and Oil Natural go up and down completely randomly.

Pair Corralation between NMDC Steel and Oil Natural

Assuming the 90 days trading horizon NMDC Steel Limited is expected to generate 1.41 times more return on investment than Oil Natural. However, NMDC Steel is 1.41 times more volatile than Oil Natural Gas. It trades about -0.09 of its potential returns per unit of risk. Oil Natural Gas is currently generating about -0.13 per unit of risk. If you would invest  5,044  in NMDC Steel Limited on September 19, 2024 and sell it today you would lose (588.00) from holding NMDC Steel Limited or give up 11.66% of portfolio value over 90 days.

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

NMDC Steel Limited  vs.  Oil Natural Gas

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 latest weak performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Oil Natural Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Natural Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NMDC Steel and Oil Natural

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

The idea behind NMDC Steel Limited and Oil Natural Gas 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.