Correlation Between NMDC Steel and JTL Industries

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Can any of the company-specific risk be diversified away by investing in both NMDC Steel 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 Steel 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 Steel Limited and JTL Industries, you can compare the effects of market volatilities on NMDC Steel 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 Steel with a short position of JTL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC Steel and JTL Industries.

Diversification Opportunities for NMDC Steel and JTL Industries

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between NMDC and JTL is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel 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 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 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 Steel i.e., NMDC Steel and JTL Industries go up and down completely randomly.

Pair Corralation between NMDC Steel and JTL Industries

Assuming the 90 days trading horizon NMDC Steel Limited is expected to generate 0.17 times more return on investment than JTL Industries. However, NMDC Steel Limited is 5.85 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 -0.18 per unit of risk. If you would invest  4,749  in NMDC Steel Limited on September 1, 2024 and sell it today you would lose (151.00) from holding NMDC Steel Limited or give up 3.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

NMDC Steel Limited  vs.  JTL Industries

 Performance 
       Timeline  
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 weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
JTL Industries 

Risk-Adjusted Performance

0 of 100

 
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 uncertain 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 Steel and JTL Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NMDC Steel and JTL Industries

The main advantage of trading using opposite NMDC Steel and JTL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMDC Steel 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 Steel 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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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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