Correlation Between NMDC Steel and Newgen Software

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Can any of the company-specific risk be diversified away by investing in both NMDC Steel and Newgen Software 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 Newgen Software 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 Newgen Software Technologies, you can compare the effects of market volatilities on NMDC Steel and Newgen Software 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 Newgen Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC Steel and Newgen Software.

Diversification Opportunities for NMDC Steel and Newgen Software

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between NMDC and Newgen is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Steel Limited and Newgen Software Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newgen Software Tech 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 Newgen Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newgen Software Tech has no effect on the direction of NMDC Steel i.e., NMDC Steel and Newgen Software go up and down completely randomly.

Pair Corralation between NMDC Steel and Newgen Software

Assuming the 90 days trading horizon NMDC Steel Limited is expected to generate 0.52 times more return on investment than Newgen Software. However, NMDC Steel Limited is 1.91 times less risky than Newgen Software. It trades about -0.05 of its potential returns per unit of risk. Newgen Software Technologies is currently generating about -0.33 per unit of risk. If you would invest  4,315  in NMDC Steel Limited on November 1, 2024 and sell it today you would lose (178.00) from holding NMDC Steel Limited or give up 4.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NMDC Steel Limited  vs.  Newgen Software Technologies

 Performance 
       Timeline  
NMDC Steel Limited 

Risk-Adjusted Performance

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Over the last 90 days NMDC Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.
Newgen Software Tech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Newgen Software Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NMDC Steel and Newgen Software Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NMDC Steel and Newgen Software

The main advantage of trading using opposite NMDC Steel and Newgen Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMDC Steel position performs unexpectedly, Newgen Software 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 Newgen Software will offset losses from the drop in Newgen Software's long position.
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The idea behind NMDC Steel Limited and Newgen Software Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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