Correlation Between Shenyang Chemical and NAURA Technology

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

By analyzing existing cross correlation between Shenyang Chemical Industry and NAURA Technology Group, you can compare the effects of market volatilities on Shenyang Chemical and NAURA Technology 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 Shenyang Chemical with a short position of NAURA Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Chemical and NAURA Technology.

Diversification Opportunities for Shenyang Chemical and NAURA Technology

0.74

Correlation Coefficient

Shenyang Chemical  NAURA Technology

Poor diversification

The 3 months correlation between Shenyang and NAURA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Chemical Industry and NAURA Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAURA Technology and Shenyang Chemical 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 Shenyang Chemical Industry are associated (or correlated) with NAURA Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAURA Technology has no effect on the direction of Shenyang Chemical i.e., Shenyang Chemical and NAURA Technology go up and down completely randomly.

Pair Corralation between Shenyang Chemical and NAURA Technology

Assuming the 90 days trading horizon Shenyang Chemical Industry is expected to generate 1.96 times more return on investment than NAURA Technology. However, Shenyang Chemical is 1.96 times more volatile than NAURA Technology Group. It trades about 0.11 of its potential returns per unit of risk. NAURA Technology Group is currently generating about -0.19 per unit of risk. If you would invest  376.00  in Shenyang Chemical Industry on September 21, 2024 and sell it today you would earn a total of  28.00  from holding Shenyang Chemical Industry or generate 7.45% return on investment over 90 days.

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

Shenyang Chemical Industry  vs.  NAURA Technology Group

Shenyang Chemical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

NAURA Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NAURA Technology Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NAURA Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenyang Chemical and NAURA Technology

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

The idea behind Shenyang Chemical Industry and NAURA Technology Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.