Correlation Between NMDC and Deepak Nitrite

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

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

Diversification Opportunities for NMDC and Deepak Nitrite

0.77

Correlation Coefficient

NMDC  Deepak Nitrite

Poor diversification

The 3 months correlation between NMDC and Deepak is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Deepak Nitrite Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deepak Nitrite 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 Deepak Nitrite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deepak Nitrite has no effect on the direction of NMDC i.e., NMDC and Deepak Nitrite go up and down completely randomly.

Pair Corralation between NMDC and Deepak Nitrite

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.01 times more return on investment than Deepak Nitrite. However, NMDC is 1.01 times more volatile than Deepak Nitrite Limited. It trades about -0.13 of its potential returns per unit of risk. Deepak Nitrite Limited is currently generating about -0.22 per unit of risk. If you would invest  7,856  in NMDC Limited on December 3, 2024 and sell it today you would lose (1,550) from holding NMDC Limited or give up 19.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NMDC Limited  vs.  Deepak Nitrite Limited

NMDC Limited

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Deepak Nitrite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deepak Nitrite Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NMDC and Deepak Nitrite

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

The idea behind NMDC Limited and Deepak Nitrite 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.