Correlation Between NMDC and Gujarat Narmada

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

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

Diversification Opportunities for NMDC and Gujarat Narmada

0.56

Correlation Coefficient

NMDC  Gujarat Narmada

Very weak diversification

The 3 months correlation between NMDC and Gujarat is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding NMDC Limited and Gujarat Narmada Valley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Narmada Valley 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 Gujarat Narmada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Narmada Valley has no effect on the direction of NMDC i.e., NMDC and Gujarat Narmada go up and down completely randomly.

Pair Corralation between NMDC and Gujarat Narmada

Assuming the 90 days trading horizon NMDC Limited is expected to generate 1.0 times more return on investment than Gujarat Narmada. However, NMDC Limited is 1.0 times less risky than Gujarat Narmada. It trades about 0.11 of its potential returns per unit of risk. Gujarat Narmada Valley is currently generating about 0.1 per unit of risk. If you would invest  6,436  in NMDC Limited on May 6, 2025 and sell it today you would earn a total of  746.00  from holding NMDC Limited or generate 11.59% return on investment over 90 days.

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

NMDC Limited  vs.  Gujarat Narmada Valley

NMDC Limited

Risk-Adjusted Performance

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

Gujarat Narmada Valley

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Narmada Valley are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Gujarat Narmada may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with NMDC and Gujarat Narmada

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

The idea behind NMDC Limited and Gujarat Narmada Valley 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.