Correlation Between NMDC and Datamatics Global

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

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

Diversification Opportunities for NMDC and Datamatics Global

0.08

Correlation Coefficient

NMDC  Datamatics Global

Significant diversification

The 3 months correlation between NMDC and Datamatics is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Datamatics Global Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datamatics Global 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 Datamatics Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datamatics Global has no effect on the direction of NMDC i.e., NMDC and Datamatics Global go up and down completely randomly.

Pair Corralation between NMDC and Datamatics Global

Assuming the 90 days trading horizon NMDC Limited is expected to under-perform the Datamatics Global. But the stock apears to be less risky and, when comparing its historical volatility, NMDC Limited is 1.29 times less risky than Datamatics Global. The stock trades about -0.17 of its potential returns per unit of risk. The Datamatics Global Services is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  54,075  in Datamatics Global Services on September 25, 2024 and sell it today you would earn a total of  10,020  from holding Datamatics Global Services or generate 18.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

NMDC Limited  vs.  Datamatics Global Services

NMDC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMDC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NMDC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Datamatics Global

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with NMDC and Datamatics Global

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

The idea behind NMDC Limited and Datamatics Global Services 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.