Correlation Between GPT Healthcare and NMDC Steel

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Can any of the company-specific risk be diversified away by investing in both GPT Healthcare and NMDC Steel 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 GPT Healthcare and NMDC Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GPT Healthcare and NMDC Steel Limited, you can compare the effects of market volatilities on GPT Healthcare and NMDC Steel 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 GPT Healthcare with a short position of NMDC Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GPT Healthcare and NMDC Steel.

Diversification Opportunities for GPT Healthcare and NMDC Steel

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between GPT and NMDC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and NMDC Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Steel Limited and GPT Healthcare 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 GPT Healthcare are associated (or correlated) with NMDC Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Steel Limited has no effect on the direction of GPT Healthcare i.e., GPT Healthcare and NMDC Steel go up and down completely randomly.

Pair Corralation between GPT Healthcare and NMDC Steel

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 1.22 times more return on investment than NMDC Steel. However, GPT Healthcare is 1.22 times more volatile than NMDC Steel Limited. It trades about 0.03 of its potential returns per unit of risk. NMDC Steel Limited is currently generating about -0.09 per unit of risk. If you would invest  16,639  in GPT Healthcare on September 3, 2024 and sell it today you would earn a total of  1,252  from holding GPT Healthcare or generate 7.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

GPT Healthcare  vs.  NMDC Steel Limited

 Performance 
       Timeline  
GPT Healthcare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
NMDC Steel Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

GPT Healthcare and NMDC Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GPT Healthcare and NMDC Steel

The main advantage of trading using opposite GPT Healthcare and NMDC Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GPT Healthcare position performs unexpectedly, NMDC Steel 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 Steel will offset losses from the drop in NMDC Steel's long position.
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The idea behind GPT Healthcare and NMDC Steel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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