Correlation Between AUTHUM INVESTMENT and NMDC

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

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

Diversification Opportunities for AUTHUM INVESTMENT and NMDC

0.26

Correlation Coefficient

AUTHUM INVESTMENT  NMDC

Modest diversification

The 3 months correlation between AUTHUM and NMDC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding AUTHUM INVESTMENT INFRASTRUCTU and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and AUTHUM INVESTMENT 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 AUTHUM INVESTMENT INFRASTRUCTU are associated (or correlated) with NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of AUTHUM INVESTMENT i.e., AUTHUM INVESTMENT and NMDC go up and down completely randomly.

Pair Corralation between AUTHUM INVESTMENT and NMDC

Assuming the 90 days trading horizon AUTHUM INVESTMENT INFRASTRUCTU is expected to generate 1.4 times more return on investment than NMDC. However, AUTHUM INVESTMENT is 1.4 times more volatile than NMDC Limited. It trades about 0.13 of its potential returns per unit of risk. NMDC Limited is currently generating about -0.15 per unit of risk. If you would invest  158,235  in AUTHUM INVESTMENT INFRASTRUCTU on September 28, 2024 and sell it today you would earn a total of  9,905  from holding AUTHUM INVESTMENT INFRASTRUCTU or generate 6.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

AUTHUM INVESTMENT INFRASTRUCTU  vs.  NMDC Limited

AUTHUM INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTHUM INVESTMENT INFRASTRUCTU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUTHUM INVESTMENT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

NMDC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMDC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with AUTHUM INVESTMENT and NMDC

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

The idea behind AUTHUM INVESTMENT INFRASTRUCTU and NMDC 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.