Correlation Between UltraTech Cement and NMDC

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

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

Diversification Opportunities for UltraTech Cement and NMDC

0.0

Correlation Coefficient

UltraTech Cement  NMDC

Pay attention - limited upside

The 3 months correlation between UltraTech and NMDC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding UltraTech Cement Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and UltraTech Cement 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 UltraTech Cement Limited 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 UltraTech Cement i.e., UltraTech Cement and NMDC go up and down completely randomly.

Pair Corralation between UltraTech Cement and NMDC

Assuming the 90 days trading horizon UltraTech Cement is expected to generate 11.82 times less return on investment than NMDC. But when comparing it to its historical volatility, UltraTech Cement Limited is 1.58 times less risky than NMDC. It trades about 0.01 of its potential returns per unit of risk. NMDC Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  20,964  in NMDC Limited on September 4, 2024 and sell it today you would earn a total of  2,211  from holding NMDC Limited or generate 10.55% return on investment over 90 days.

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

UltraTech Cement Limited  vs.  NMDC Limited

UltraTech Cement

Risk-Adjusted Performance

0 of 100

Very Weak

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

NMDC Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UltraTech Cement and NMDC

The main advantage of trading using opposite UltraTech Cement and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UltraTech Cement 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 UltraTech Cement Limited 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.