Correlation Between NMDC and Godawari Power

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

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

Diversification Opportunities for NMDC and Godawari Power

0.64

Correlation Coefficient

NMDC  Godawari Power

Poor diversification

The 3 months correlation between NMDC and Godawari is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Godawari Power And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Godawari Power And 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 Godawari Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Godawari Power And has no effect on the direction of NMDC i.e., NMDC and Godawari Power go up and down completely randomly.

Pair Corralation between NMDC and Godawari Power

Assuming the 90 days trading horizon NMDC is expected to generate 4.39 times less return on investment than Godawari Power. But when comparing it to its historical volatility, NMDC Limited is 1.27 times less risky than Godawari Power. It trades about 0.19 of its potential returns per unit of risk. Godawari Power And is currently generating about 0.67 of returns per unit of risk over similar time horizon. If you would invest  18,611  in Godawari Power And on September 16, 2024 and sell it today you would earn a total of  4,729  from holding Godawari Power And or generate 25.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

NMDC Limited  vs.  Godawari Power And

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 weak basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Godawari Power And

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Godawari Power And are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Godawari Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMDC and Godawari Power

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

The idea behind NMDC Limited and Godawari Power And 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.