Correlation Between China Minmetals and NAURA Technology

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

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

Diversification Opportunities for China Minmetals and NAURA Technology

0.68

Correlation Coefficient

China Minmetals  NAURA Technology

Poor diversification

The 3 months correlation between China and NAURA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and NAURA Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAURA Technology and China Minmetals 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 China Minmetals Rare 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 China Minmetals i.e., China Minmetals and NAURA Technology go up and down completely randomly.

Pair Corralation between China Minmetals and NAURA Technology

Assuming the 90 days trading horizon China Minmetals Rare is expected to under-perform the NAURA Technology. But the stock apears to be less risky and, when comparing its historical volatility, China Minmetals Rare is 1.03 times less risky than NAURA Technology. The stock trades about -0.02 of its potential returns per unit of risk. The NAURA Technology Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  23,335  in NAURA Technology Group on October 22, 2024 and sell it today you would earn a total of  15,523  from holding NAURA Technology Group or generate 66.52% return on investment over 90 days.

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

China Minmetals Rare  vs.  NAURA Technology Group

China Minmetals Rare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Minmetals Rare are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Minmetals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NAURA Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAURA Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NAURA Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Minmetals and NAURA Technology

The main advantage of trading using opposite China Minmetals and NAURA Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Minmetals 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 China Minmetals Rare 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.