Correlation Between Ami Organics and NMDC

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

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

Diversification Opportunities for Ami Organics and NMDC

0.28

Correlation Coefficient

Ami Organics  NMDC

Modest diversification

The 3 months correlation between Ami and NMDC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ami Organics Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Ami Organics 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 Ami Organics Limited 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 Ami Organics i.e., Ami Organics and NMDC go up and down completely randomly.

Pair Corralation between Ami Organics and NMDC

Assuming the 90 days trading horizon Ami Organics Limited is expected to generate 1.6 times more return on investment than NMDC. However, Ami Organics is 1.6 times more volatile than NMDC Limited. It trades about 0.08 of its potential returns per unit of risk. NMDC Limited is currently generating about 0.05 per unit of risk. If you would invest  211,295  in Ami Organics Limited on December 30, 2024 and sell it today you would earn a total of  32,785  from holding Ami Organics Limited or generate 15.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ami Organics Limited  vs.  NMDC Limited

Ami Organics Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ami Organics Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Ami Organics sustained solid returns over the last few months and may actually be approaching a breakup point.

NMDC Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ami Organics and NMDC

The main advantage of trading using opposite Ami Organics and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ami Organics 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 Ami Organics Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.