NTPC - NMDC Pair Analysis

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End-of-day divergence (Standardized residual) is 0.792.
Half life of pair is 23.3.
Real time (live) divergence is calculating using following formula:
[nmdc_price - (0.892 * ntpc_price) - 0.0358]/12.5

(where 0.0358 is mean error and 12.5 is standard error)
Technical strength of NTPC is 1.7. (Support & Resistance)
Technical strength of NMDC is 7.2. (Support & Resistance)
Recommendation
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Entry Criterion: Take positions when divergence becomes (+/-)2.5. And exit positions when divergence becomes (+/-)0.0.
Stop Loss: Put your stop loss when divergence becomes more than 3.0 or less than -3.0. We suggest you always use stop losses.
Note: When you trade in futures, keep in mind the expiry date of futures as divergence might not end before expiry date.
Analyse any other pair:

How to choose pairs?
Choose stocks from same sector/subsector.
Use stock with large market capitalization as first stock.

Charts

NTPC Futures - NSE
Expiry Date Close Price Open Interest Number of Trades No of Contracts Underlying Closing Price
August 27, 2020 83.85 59280000.0 2277.0 2277.0 85.9
September 24, 2020 83.85 3858900.0 95.0 95.0 85.9
October 29, 2020 83.7 62700.0 0.0 0.0 85.9
Lot size: 4800.

NMDC Futures - NSE

Expiry Date Close Price Open Interest Number of Trades No of Contracts Underlying Closing Price
August 27, 2020 87.1 33178400.0 2427.0 2427.0 86.55
September 24, 2020 87.4 442200.0 42.0 42.0 86.55
October 29, 2020 87.25 26800.0 4.0 4.0 86.55
Lot size: 6000.
Click here for backtesting results.

NTPC-NMDC Analysis with different time frames and thresholds

Time Frame 3months, Entry Threshold 2.5, Stop Loss Threshold 3, Total Profit 64506.7083348
Time Frame 6months, Entry Threshold 2, Stop Loss Threshold 2.5, Total Profit 64393.9674653
Time Frame 1year, Entry Threshold 2.5, Stop Loss Threshold 3, Total Profit 59341.6943374
Time Frame 6months, Entry Threshold 2, Stop Loss Threshold 3, Total Profit 57252.4062259
Time Frame 3months, Entry Threshold 2, Stop Loss Threshold 3, Total Profit 44975.0589469

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