Correlation Between Gujarat Narmada and NMDC

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

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

Diversification Opportunities for Gujarat Narmada and NMDC

-0.08

Correlation Coefficient

Gujarat Narmada  NMDC

Good diversification

The 3 months correlation between Gujarat and NMDC is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Gujarat Narmada 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 Gujarat Narmada Valley 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 Gujarat Narmada i.e., Gujarat Narmada and NMDC go up and down completely randomly.

Pair Corralation between Gujarat Narmada and NMDC

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to under-perform the NMDC. But the stock apears to be less risky and, when comparing its historical volatility, Gujarat Narmada Valley is 1.02 times less risky than NMDC. The stock trades about -0.05 of its potential returns per unit of risk. The NMDC Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  21,493  in NMDC Limited on September 2, 2024 and sell it today you would earn a total of  1,514  from holding NMDC Limited or generate 7.04% return on investment over 90 days.

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

Gujarat Narmada Valley  vs.  NMDC Limited

Gujarat Narmada Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Narmada Valley 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.

NMDC Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gujarat Narmada and NMDC

The main advantage of trading using opposite Gujarat Narmada and NMDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Narmada 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 Gujarat Narmada Valley 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.