Correlation Between NMDC and Indo Amines

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

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

Diversification Opportunities for NMDC and Indo Amines

0.23

Correlation Coefficient

NMDC  Indo Amines

Modest diversification

The 3 months correlation between NMDC and Indo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Indo Amines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Amines 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 Indo Amines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Amines Limited has no effect on the direction of NMDC i.e., NMDC and Indo Amines go up and down completely randomly.

Pair Corralation between NMDC and Indo Amines

Assuming the 90 days trading horizon NMDC Limited is expected to under-perform the Indo Amines. In addition to that, NMDC is 4.12 times more volatile than Indo Amines Limited. It trades about -0.23 of its total potential returns per unit of risk. Indo Amines Limited is currently generating about -0.15 per unit of volatility. If you would invest  16,905  in Indo Amines Limited on October 26, 2024 and sell it today you would lose (1,949) from holding Indo Amines Limited or give up 11.53% of portfolio value over 90 days.

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

NMDC Limited  vs.  Indo Amines Limited

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.

Indo Amines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Amines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Indo Amines is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NMDC and Indo Amines

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

The idea behind NMDC Limited and Indo Amines 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.