Correlation Between Investment Trust and NMDC

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

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

Diversification Opportunities for Investment Trust and NMDC

-0.06

Correlation Coefficient

Investment Trust  NMDC

Good diversification

The 3 months correlation between Investment and NMDC is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Investment Trust 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 The Investment Trust are associated (or correlated) with NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of Investment Trust i.e., Investment Trust and NMDC go up and down completely randomly.

Pair Corralation between Investment Trust and NMDC

Assuming the 90 days trading horizon Investment Trust is expected to generate 8.33 times less return on investment than NMDC. But when comparing it to its historical volatility, The Investment Trust is 8.34 times less risky than NMDC. It trades about 0.07 of its potential returns per unit of risk. NMDC Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,623  in NMDC Limited on October 4, 2024 and sell it today you would earn a total of  3,146  from holding NMDC Limited or generate 86.83% return on investment over 90 days.

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

The Investment Trust  vs.  NMDC Limited

Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investment Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Investment Trust and NMDC

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

The idea behind The Investment Trust and NMDC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.