Correlation Between NMDC and Alcoa

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

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

Diversification Opportunities for NMDC and Alcoa

0.82
  Correlation Coefficient
NMDC LTD
Alcoa

Very poor diversification

The 3 months correlation between NMDC and Alcoa is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NMDC LTD and Alcoa Corp. in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Alcoa 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 LTD are associated (or correlated) with Alcoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa has no effect on the direction of NMDC i.e. NMDC and Alcoa go up and down completely randomly.

Pair Corralation between NMDC and Alcoa

Assuming the 30 trading days horizon, NMDC is expected to generate 7.2 times less return on investment than Alcoa. But when comparing it to its historical volatility, NMDC LTD is 1.78 times less risky than Alcoa. It trades about 0.04 of its potential returns per unit of risk. Alcoa is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  741.00  in Alcoa on June 8, 2020 and sell it today you would earn a total of  382.00  from holding Alcoa or generate 51.55% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy87.1%
ValuesDaily Returns

NMDC LTD  vs.  Alcoa Corp.

 Performance (%) 
      Timeline 
NMDC LTD 
22

NMDC Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 30 days. Although quite weak forward indicators, NMDC may actually be approaching a critical reversion point that can send shares even higher in August 2020.
Alcoa 
1010

Alcoa Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa are ranked lower than 10 (%) of all global equities and portfolios over the last 30 days. Despite somewhat unfluctuating basic indicators, Alcoa sustained solid returns over the last few months and may actually be approaching a breakup point.

NMDC and Alcoa Volatility Contrast

 Predicted Return Density 
      Returns 
Check out your portfolio center. Please also try Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.


 
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