{"id":40670,"date":"2011-12-09T15:08:38","date_gmt":"2011-12-09T09:38:38","guid":{"rendered":"index.php\/2011\/12\/09\/correlation-in-the-nse\/"},"modified":"2012-02-06T11:19:29","modified_gmt":"2012-02-06T05:49:29","slug":"correlation-in-the-nse","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2011\/12\/09\/correlation-in-the-nse\/","title":{"rendered":"Correlation in the NSE"},"content":{"rendered":"

Meet the worst nightmare of stock-pickers and the best friend of technical traders: Correlation.<\/p>\n

This year has been unkind to stock-pickers as markets have tended to move in unison, with price moves increasingly driven by the ebb and flow of investors\u2019 fears (risk-on\/risk-off) over the economic environment. We setup a correlation matrix between the NIFTY50 stocks and the index itself to see how we faired this year.<\/p>\n

\"clip_image002\"<\/a> <\/p>\n

The vertical axis here is the correlation between individual stocks (dots) with the index. <\/p>\n

Now lets do a quick gut-check. The top 3 stocks with the highest correlations with the index were: <\/p>\n

RELCAPITAL<\/a>, ICICIBANK<\/a> and STER<\/a>. A quick look at their charts show that it is indeed so. The ones that were closer to zero are: GRASIM<\/a>, SIEMENS<\/a> and RANBAXY<\/a>. They may have been highly volatile, but we are only looking at correlation for now.For stocks that went the other way, we have: HEROMOTOCO<\/a>, BAJAJ-AUTO<\/a> and HINDUNILVR<\/a>. <\/p>\n

There\u2019s really no actionable information here, except that instead of tracking close to 30 stocks in the index, you are better off just buying the NIFTYBEES and saving yourself a lot of effort. <\/p>\n

For the more inquisitive, the data can be found on google docs<\/a>.<\/td>\n<\/p>\n

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