Correlation Between EPL and NMDC
Can any of the company-specific risk be diversified away by investing in both EPL and NMDC 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 EPL and NMDC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EPL Limited and NMDC Limited, you can compare the effects of market volatilities on EPL and NMDC 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 EPL with a short position of NMDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of EPL and NMDC.
Diversification Opportunities for EPL and NMDC
Very good diversification
The 3 months correlation between EPL and NMDC is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding EPL Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and EPL 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 EPL Limited are associated (or correlated) with NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of EPL i.e., EPL and NMDC go up and down completely randomly.
Pair Corralation between EPL and NMDC
Assuming the 90 days trading horizon EPL Limited is expected to under-perform the NMDC. But the stock apears to be less risky and, when comparing its historical volatility, EPL Limited is 1.09 times less risky than NMDC. The stock trades about -0.17 of its potential returns per unit of risk. The NMDC Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6,466 in NMDC Limited on January 5, 2025 and sell it today you would earn a total of 36.00 from holding NMDC Limited or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EPL Limited vs. NMDC Limited
Performance |
| Timeline |
| EPL Limited |
| NMDC Limited |
EPL and NMDC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EPL and NMDC
The main advantage of trading using opposite EPL and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EPL position performs unexpectedly, NMDC 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 NMDC will offset losses from the drop in NMDC's long position.| EPL vs. NMDC Limited | EPL vs. Steel Authority of | EPL vs. Embassy Office Parks | EPL vs. Jai Balaji Industries |
| NMDC vs. Rajnandini Metal Limited | NMDC vs. Apex Frozen Foods | NMDC vs. Hindustan Foods Limited | NMDC vs. Varun Beverages Limited |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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