Correlation Between NMDC Steel and Hi Tech

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

Diversification Opportunities for NMDC Steel and Hi Tech

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between NMDC and HITECH is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Hi Tech Pipes Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Pipes and NMDC Steel 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 Steel Limited are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Pipes has no effect on the direction of NMDC Steel i.e., NMDC Steel and Hi Tech go up and down completely randomly.

Pair Corralation between NMDC Steel and Hi Tech

Assuming the 90 days trading horizon NMDC Steel Limited is expected to generate 1.13 times more return on investment than Hi Tech. However, NMDC Steel is 1.13 times more volatile than Hi Tech Pipes Limited. It trades about -0.06 of its potential returns per unit of risk. Hi Tech Pipes Limited is currently generating about -0.23 per unit of risk. If you would invest  4,213  in NMDC Steel Limited on November 7, 2024 and sell it today you would lose (212.00) from holding NMDC Steel Limited or give up 5.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

NMDC Steel Limited  vs.  Hi Tech Pipes Limited

 Performance 
       Timeline  
NMDC Steel Limited 

Risk-Adjusted Performance

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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 unsteady performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
Hi Tech Pipes 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hi Tech Pipes Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NMDC Steel and Hi Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NMDC Steel and Hi Tech

The main advantage of trading using opposite NMDC Steel and Hi Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMDC Steel position performs unexpectedly, Hi Tech 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 Hi Tech will offset losses from the drop in Hi Tech's long position.
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The idea behind NMDC Steel Limited and Hi Tech Pipes 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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