Correlation Between NMDC and Ashapura Minechem

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

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

Diversification Opportunities for NMDC and Ashapura Minechem

0.3

Correlation Coefficient

NMDC  Ashapura Minechem

Weak diversification

The 3 months correlation between NMDC and Ashapura is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Ashapura Minechem Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashapura Minechem 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 Ashapura Minechem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashapura Minechem has no effect on the direction of NMDC i.e., NMDC and Ashapura Minechem go up and down completely randomly.

Pair Corralation between NMDC and Ashapura Minechem

Assuming the 90 days trading horizon NMDC is expected to generate 2.22 times less return on investment than Ashapura Minechem. But when comparing it to its historical volatility, NMDC Limited is 1.66 times less risky than Ashapura Minechem. It trades about 0.09 of its potential returns per unit of risk. Ashapura Minechem Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,425  in Ashapura Minechem Limited on September 13, 2024 and sell it today you would earn a total of  38,970  from holding Ashapura Minechem Limited or generate 524.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.38%
Values	Daily Returns

NMDC Limited  vs.  Ashapura Minechem Limited

NMDC Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ashapura Minechem

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ashapura Minechem Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Ashapura Minechem reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMDC and Ashapura Minechem

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

The idea behind NMDC Limited and Ashapura Minechem 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.