Correlation Between NRB Industrial and Indian Railway
Can any of the company-specific risk be diversified away by investing in both NRB Industrial and Indian Railway 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 NRB Industrial and Indian Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRB Industrial Bearings and Indian Railway Finance, you can compare the effects of market volatilities on NRB Industrial and Indian Railway 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 NRB Industrial with a short position of Indian Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRB Industrial and Indian Railway.
Diversification Opportunities for NRB Industrial and Indian Railway
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NRB and Indian is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and Indian Railway Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Railway Finance and NRB Industrial 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 NRB Industrial Bearings are associated (or correlated) with Indian Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Railway Finance has no effect on the direction of NRB Industrial i.e., NRB Industrial and Indian Railway go up and down completely randomly.
Pair Corralation between NRB Industrial and Indian Railway
Assuming the 90 days trading horizon NRB Industrial is expected to generate 4.15 times less return on investment than Indian Railway. But when comparing it to its historical volatility, NRB Industrial Bearings is 1.08 times less risky than Indian Railway. It trades about 0.03 of its potential returns per unit of risk. Indian Railway Finance is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,046 in Indian Railway Finance on September 12, 2024 and sell it today you would earn a total of 12,639 from holding Indian Railway Finance or generate 414.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRB Industrial Bearings vs. Indian Railway Finance
Performance |
| Timeline |
| NRB Industrial Bearings |
| Indian Railway Finance |
NRB Industrial and Indian Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRB Industrial and Indian Railway
The main advantage of trading using opposite NRB Industrial and Indian Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRB Industrial position performs unexpectedly, Indian Railway 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 Indian Railway will offset losses from the drop in Indian Railway's long position.| NRB Industrial vs. Hisar Metal Industries | NRB Industrial vs. Manaksia Coated Metals | NRB Industrial vs. Pritish Nandy Communications | NRB Industrial vs. Shivalik Bimetal Controls |
| Indian Railway vs. 63 moons technologies | Indian Railway vs. Megastar Foods Limited | Indian Railway vs. Sarveshwar Foods Limited | Indian Railway vs. Agro Tech Foods |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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