Correlation Between NAURA Technology and Chongqing Brewery

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

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

Diversification Opportunities for NAURA Technology and Chongqing Brewery

0.75

Correlation Coefficient

NAURA Technology  Chongqing Brewery

Poor diversification

The 3 months correlation between NAURA and Chongqing is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NAURA Technology Group and Chongqing Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Brewery and NAURA Technology 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 NAURA Technology Group are associated (or correlated) with Chongqing Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Brewery has no effect on the direction of NAURA Technology i.e., NAURA Technology and Chongqing Brewery go up and down completely randomly.

Pair Corralation between NAURA Technology and Chongqing Brewery

Assuming the 90 days trading horizon NAURA Technology Group is expected to generate 1.22 times more return on investment than Chongqing Brewery. However, NAURA Technology is 1.22 times more volatile than Chongqing Brewery Co. It trades about 0.14 of its potential returns per unit of risk. Chongqing Brewery Co is currently generating about 0.17 per unit of risk. If you would invest  29,468  in NAURA Technology Group on September 16, 2024 and sell it today you would earn a total of  9,180  from holding NAURA Technology Group or generate 31.15% return on investment over 90 days.

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

NAURA Technology Group  vs.  Chongqing Brewery Co

NAURA Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NAURA Technology Group are ranked lower than 11 (%) 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.

Chongqing Brewery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Brewery Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Brewery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAURA Technology and Chongqing Brewery

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

The idea behind NAURA Technology Group and Chongqing Brewery Co 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.