Correlation Between Dalmia Bharat and NMDC

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

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

Diversification Opportunities for Dalmia Bharat and NMDC

0.02

Correlation Coefficient

Dalmia Bharat  NMDC

Significant diversification

The 3 months correlation between Dalmia and NMDC is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dalmia Bharat Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Dalmia Bharat 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 Dalmia Bharat 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 Dalmia Bharat i.e., Dalmia Bharat and NMDC go up and down completely randomly.

Pair Corralation between Dalmia Bharat and NMDC

Assuming the 90 days trading horizon Dalmia Bharat Limited is expected to under-perform the NMDC. But the stock apears to be less risky and, when comparing its historical volatility, Dalmia Bharat Limited is 15.59 times less risky than NMDC. The stock trades about -0.01 of its potential returns per unit of risk. The NMDC Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,195  in NMDC Limited on October 24, 2024 and sell it today you would lose (565.00) from holding NMDC Limited or give up 7.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Dalmia Bharat Limited  vs.  NMDC Limited

Dalmia Bharat Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dalmia Bharat Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Dalmia Bharat is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

NMDC Limited

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Dalmia Bharat and NMDC

The main advantage of trading using opposite Dalmia Bharat and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dalmia Bharat 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 Dalmia Bharat 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.