Correlation Between NMDC and Premier Polyfilm

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

Diversification Opportunities for NMDC and Premier Polyfilm

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between NMDC and Premier is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Premier Polyfilm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Polyfilm 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 Premier Polyfilm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Polyfilm has no effect on the direction of NMDC i.e., NMDC and Premier Polyfilm go up and down completely randomly.

Pair Corralation between NMDC and Premier Polyfilm

Assuming the 90 days trading horizon NMDC Limited is expected to generate 13.55 times more return on investment than Premier Polyfilm. However, NMDC is 13.55 times more volatile than Premier Polyfilm Limited. It trades about 0.13 of its potential returns per unit of risk. Premier Polyfilm Limited is currently generating about -0.08 per unit of risk. If you would invest  7,137  in NMDC Limited on October 20, 2024 and sell it today you would lose (474.00) from holding NMDC Limited or give up 6.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

NMDC Limited  vs.  Premier Polyfilm Limited

 Performance 
       Timeline  
NMDC Limited 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.
Premier Polyfilm 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Premier Polyfilm Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Premier Polyfilm reported solid returns over the last few months and may actually be approaching a breakup point.

NMDC and Premier Polyfilm Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NMDC and Premier Polyfilm

The main advantage of trading using opposite NMDC and Premier Polyfilm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMDC position performs unexpectedly, Premier Polyfilm 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 Premier Polyfilm will offset losses from the drop in Premier Polyfilm's long position.
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The idea behind NMDC Limited and Premier Polyfilm 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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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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