Correlation Between NMDC and Impex Ferro

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

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

Diversification Opportunities for NMDC and Impex Ferro

0.11

Correlation Coefficient

NMDC  Impex Ferro

Average diversification

The 3 months correlation between NMDC and Impex is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Impex Ferro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impex Ferro Tech 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 Impex Ferro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impex Ferro Tech has no effect on the direction of NMDC i.e., NMDC and Impex Ferro go up and down completely randomly.

Pair Corralation between NMDC and Impex Ferro

Assuming the 90 days trading horizon NMDC Limited is expected to generate 9.86 times more return on investment than Impex Ferro. However, NMDC is 9.86 times more volatile than Impex Ferro Tech. It trades about 0.07 of its potential returns per unit of risk. Impex Ferro Tech is currently generating about 0.03 per unit of risk. If you would invest  7,261  in NMDC Limited on October 25, 2024 and sell it today you would lose (692.00) from holding NMDC Limited or give up 9.53% of portfolio value over 90 days.

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

NMDC Limited  vs.  Impex Ferro Tech

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.

Impex Ferro Tech

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Impex Ferro Tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Impex Ferro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NMDC and Impex Ferro

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

The idea behind NMDC Limited and Impex Ferro Tech 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.