Correlation Between NMDC and JTL Industries

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

Diversification Opportunities for NMDC and JTL Industries

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between NMDC and JTL is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and JTL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JTL Industries and NMDC 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 Limited are associated (or correlated) with JTL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JTL Industries has no effect on the direction of NMDC i.e., NMDC and JTL Industries go up and down completely randomly.

Pair Corralation between NMDC and JTL Industries

Assuming the 90 days trading horizon NMDC Limited is expected to generate 0.17 times more return on investment than JTL Industries. However, NMDC Limited is 5.79 times less risky than JTL Industries. It trades about 0.07 of its potential returns per unit of risk. JTL Industries is currently generating about -0.2 per unit of risk. If you would invest  21,585  in NMDC Limited on August 25, 2024 and sell it today you would earn a total of  492.00  from holding NMDC Limited or generate 2.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

NMDC Limited  vs.  JTL Industries

 Performance 
       Timeline  
NMDC Limited 

Risk-Adjusted Performance

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Over the last 90 days NMDC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NMDC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JTL Industries 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days JTL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

NMDC and JTL Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NMDC and JTL Industries

The main advantage of trading using opposite NMDC and JTL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMDC position performs unexpectedly, JTL Industries 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 JTL Industries will offset losses from the drop in JTL Industries' long position.
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The idea behind NMDC Limited and JTL Industries 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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