Correlation Between NMDC and Indian Metals
Can any of the company-specific risk be diversified away by investing in both NMDC and Indian Metals 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 Indian Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMDC Limited and Indian Metals Ferro, you can compare the effects of market volatilities on NMDC and Indian Metals 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 Indian Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMDC and Indian Metals.
Diversification Opportunities for NMDC and Indian Metals
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NMDC and Indian is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Indian Metals Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Metals Ferro 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 Indian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Metals Ferro has no effect on the direction of NMDC i.e., NMDC and Indian Metals go up and down completely randomly.
Pair Corralation between NMDC and Indian Metals
Assuming the 90 days trading horizon NMDC is expected to generate 9.75 times less return on investment than Indian Metals. But when comparing it to its historical volatility, NMDC Limited is 1.48 times less risky than Indian Metals. It trades about 0.07 of its potential returns per unit of risk. Indian Metals Ferro is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 64,495 in Indian Metals Ferro on August 25, 2024 and sell it today you would earn a total of 18,100 from holding Indian Metals Ferro or generate 28.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMDC Limited vs. Indian Metals Ferro
Performance |
| Timeline |
| NMDC Limited |
| Indian Metals Ferro |
NMDC and Indian Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMDC and Indian Metals
The main advantage of trading using opposite NMDC and Indian Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMDC position performs unexpectedly, Indian Metals 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 Indian Metals will offset losses from the drop in Indian Metals' long position.| NMDC vs. Ratnamani Metals Tubes | NMDC vs. The Investment Trust | NMDC vs. Alkali Metals Limited | NMDC vs. Tube Investments of |
| Indian Metals vs. Rainbow Childrens Medicare | Indian Metals vs. The Federal Bank | Indian Metals vs. Generic Engineering Construction | Indian Metals vs. Garuda Construction Engineering |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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