Correlation Between NMDC and Life Insurance

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

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

Diversification Opportunities for NMDC and Life Insurance

-0.13

Correlation Coefficient

NMDC  Life Insurance

Good diversification

The 3 months correlation between NMDC and Life is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance 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 Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of NMDC i.e., NMDC and Life Insurance go up and down completely randomly.

Pair Corralation between NMDC and Life Insurance

Assuming the 90 days trading horizon NMDC Limited is expected to generate 11.65 times more return on investment than Life Insurance. However, NMDC is 11.65 times more volatile than Life Insurance. It trades about 0.07 of its potential returns per unit of risk. Life Insurance is currently generating about 0.04 per unit of risk. If you would invest  3,676  in NMDC Limited on October 3, 2024 and sell it today you would earn a total of  2,916  from holding NMDC Limited or generate 79.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

NMDC Limited  vs.  Life Insurance

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 uncertain basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NMDC and Life Insurance

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

The idea behind NMDC Limited and Life Insurance 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..