Correlation Between NMDC and Dalmia Bharat

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

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

Diversification Opportunities for NMDC and Dalmia Bharat

-0.09

Correlation Coefficient

NMDC  Dalmia Bharat

Good diversification

The 3 months correlation between NMDC and Dalmia is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Dalmia Bharat Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalmia Bharat Limited 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 Dalmia Bharat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalmia Bharat Limited has no effect on the direction of NMDC i.e., NMDC and Dalmia Bharat go up and down completely randomly.

Pair Corralation between NMDC and Dalmia Bharat

Assuming the 90 days trading horizon NMDC Limited is expected to generate 25.42 times more return on investment than Dalmia Bharat. However, NMDC is 25.42 times more volatile than Dalmia Bharat Limited. It trades about 0.11 of its potential returns per unit of risk. Dalmia Bharat Limited is currently generating about -0.2 per unit of risk. If you would invest  8,051  in NMDC Limited on October 9, 2024 and sell it today you would lose (1,561) from holding NMDC Limited or give up 19.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

NMDC Limited  vs.  Dalmia Bharat Limited

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.

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 current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NMDC and Dalmia Bharat

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

The idea behind NMDC Limited and Dalmia Bharat 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.