Correlation Between NMDC and Digjam

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

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

Diversification Opportunities for NMDC and Digjam

0.53

Correlation Coefficient

NMDC  Digjam

Very weak diversification

The 3 months correlation between NMDC and Digjam is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam 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 Digjam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digjam Limited has no effect on the direction of NMDC i.e., NMDC and Digjam go up and down completely randomly.

Pair Corralation between NMDC and Digjam

Assuming the 90 days trading horizon NMDC Limited is expected to generate 0.87 times more return on investment than Digjam. However, NMDC Limited is 1.15 times less risky than Digjam. It trades about 0.02 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.25 per unit of risk. If you would invest  6,909  in NMDC Limited on December 25, 2024 and sell it today you would earn a total of  44.00  from holding NMDC Limited or generate 0.64% return on investment over 90 days.

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

NMDC Limited  vs.  Digjam Limited

NMDC Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Digjam Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digjam Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with NMDC and Digjam

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

The idea behind NMDC Limited and Digjam 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.