Correlation Between NMDC and Ratnamani Metals

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

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

Diversification Opportunities for NMDC and Ratnamani Metals

-0.34

Correlation Coefficient

NMDC  Ratnamani Metals

Very good diversification

The 3 months correlation between NMDC and Ratnamani is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Ratnamani Metals Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratnamani Metals Tubes 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 Ratnamani Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratnamani Metals Tubes has no effect on the direction of NMDC i.e., NMDC and Ratnamani Metals go up and down completely randomly.

Pair Corralation between NMDC and Ratnamani Metals

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.36 times more return on investment than Ratnamani Metals. However, NMDC is 1.36 times more volatile than Ratnamani Metals Tubes. It trades about 0.05 of its potential returns per unit of risk. Ratnamani Metals Tubes is currently generating about -0.07 per unit of risk. If you would invest  21,493  in NMDC Limited on August 31, 2024 and sell it today you would earn a total of  1,280  from holding NMDC Limited or generate 5.96% return on investment over 90 days.

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

NMDC Limited  vs.  Ratnamani Metals Tubes

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 uncertain basic indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ratnamani Metals Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ratnamani Metals Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NMDC and Ratnamani Metals

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

The idea behind NMDC Limited and Ratnamani Metals Tubes 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.