Correlation Between NMDC and Sanginita Chemicals

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

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

Diversification Opportunities for NMDC and Sanginita Chemicals

0.16

Correlation Coefficient

NMDC  Sanginita Chemicals

Average diversification

The 3 months correlation between NMDC and Sanginita is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Sanginita Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanginita Chemicals 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 Sanginita Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanginita Chemicals has no effect on the direction of NMDC i.e., NMDC and Sanginita Chemicals go up and down completely randomly.

Pair Corralation between NMDC and Sanginita Chemicals

Assuming the 90 days trading horizon NMDC Limited is expected to generate 0.86 times more return on investment than Sanginita Chemicals. However, NMDC Limited is 1.16 times less risky than Sanginita Chemicals. It trades about 0.1 of its potential returns per unit of risk. Sanginita Chemicals Limited is currently generating about 0.02 per unit of risk. If you would invest  21,400  in NMDC Limited on September 12, 2024 and sell it today you would earn a total of  2,715  from holding NMDC Limited or generate 12.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

NMDC Limited  vs.  Sanginita Chemicals Limited

NMDC Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NMDC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sanginita Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sanginita Chemicals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Sanginita Chemicals is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NMDC and Sanginita Chemicals

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

The idea behind NMDC Limited and Sanginita Chemicals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.