Correlation Between NMDC and Ramco Cements

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

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

Diversification Opportunities for NMDC and Ramco Cements

0.47

Correlation Coefficient

NMDC  Ramco Cements

Very weak diversification

The 3 months correlation between NMDC and Ramco is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and The Ramco Cements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramco Cements 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 Ramco Cements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramco Cements has no effect on the direction of NMDC i.e., NMDC and Ramco Cements go up and down completely randomly.

Pair Corralation between NMDC and Ramco Cements

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.49 times more return on investment than Ramco Cements. However, NMDC is 1.49 times more volatile than The Ramco Cements. It trades about 0.0 of its potential returns per unit of risk. The Ramco Cements is currently generating about -0.13 per unit of risk. If you would invest  6,844  in NMDC Limited on December 24, 2024 and sell it today you would lose (93.00) from holding NMDC Limited or give up 1.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

NMDC Limited  vs.  The Ramco Cements

NMDC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days NMDC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NMDC is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Ramco Cements

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Ramco Cements has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NMDC and Ramco Cements

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

The idea behind NMDC Limited and The Ramco Cements 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.