Correlation Between NMDC and EPL

Can any of the company-specific risk be diversified away by investing in both NMDC and EPL 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 EPL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NMDC Limited and EPL Limited, you can compare the effects of market volatilities on NMDC and EPL 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 EPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC and EPL.

Diversification Opportunities for NMDC and EPL

0.81

Correlation Coefficient

NMDC  EPL

Very poor diversification

The 3 months correlation between NMDC and EPL is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and EPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPL Limited 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 EPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPL Limited has no effect on the direction of NMDC i.e., NMDC and EPL go up and down completely randomly.

Pair Corralation between NMDC and EPL

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.05 times more return on investment than EPL. However, NMDC is 1.05 times more volatile than EPL Limited. It trades about 0.07 of its potential returns per unit of risk. EPL Limited is currently generating about 0.02 per unit of risk. If you would invest  3,385  in NMDC Limited on April 11, 2025 and sell it today you would earn a total of  3,405  from holding NMDC Limited or generate 100.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

NMDC Limited  vs.  EPL Limited

NMDC Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in August 2025.

EPL Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EPL Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, EPL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMDC and EPL

The main advantage of trading using opposite NMDC and EPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMDC position performs unexpectedly, EPL 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 EPL will offset losses from the drop in EPL's long position.

The idea behind NMDC Limited and EPL 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.