Correlation Between NMDC and Fine Organic

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

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

Diversification Opportunities for NMDC and Fine Organic

-0.12

Correlation Coefficient

NMDC  Fine Organic

Good diversification

The 3 months correlation between NMDC and Fine is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Fine Organic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Organic Industries 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 Fine Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Organic Industries has no effect on the direction of NMDC i.e., NMDC and Fine Organic go up and down completely randomly.

Pair Corralation between NMDC and Fine Organic

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.22 times more return on investment than Fine Organic. However, NMDC is 1.22 times more volatile than Fine Organic Industries. It trades about 0.05 of its potential returns per unit of risk. Fine Organic Industries is currently generating about -0.05 per unit of risk. If you would invest  6,464  in NMDC Limited on December 30, 2024 and sell it today you would earn a total of  425.00  from holding NMDC Limited or generate 6.57% return on investment over 90 days.

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

NMDC Limited  vs.  Fine Organic Industries

NMDC Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fine Organic Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fine Organic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NMDC and Fine Organic

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

The idea behind NMDC Limited and Fine Organic Industries 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.