Correlation Between LT Foods and NMDC

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

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

Diversification Opportunities for LT Foods and NMDC

0.13

Correlation Coefficient

LT Foods  NMDC

Average diversification

The 3 months correlation between LTFOODS and NMDC is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding LT Foods Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and LT Foods 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 LT Foods 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 LT Foods i.e., LT Foods and NMDC go up and down completely randomly.

Pair Corralation between LT Foods and NMDC

Assuming the 90 days trading horizon LT Foods is expected to generate 3.83 times less return on investment than NMDC. In addition to that, LT Foods is 1.35 times more volatile than NMDC Limited. It trades about 0.02 of its total potential returns per unit of risk. NMDC Limited is currently generating about 0.09 per unit of volatility. If you would invest  21,760  in NMDC Limited on September 14, 2024 and sell it today you would earn a total of  2,319  from holding NMDC Limited or generate 10.66% return on investment over 90 days.

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

LT Foods Limited  vs.  NMDC Limited

LT Foods Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LT Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LT Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

NMDC Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LT Foods and NMDC

The main advantage of trading using opposite LT Foods and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LT Foods 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 LT Foods 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.