Correlation Between NAURA Technology and Allied Machinery

Can any of the company-specific risk be diversified away by investing in both NAURA Technology and Allied Machinery 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 Allied Machinery 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 Allied Machinery Co, you can compare the effects of market volatilities on NAURA Technology and Allied Machinery 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 Allied Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAURA Technology and Allied Machinery.

Diversification Opportunities for NAURA Technology and Allied Machinery

0.57

Correlation Coefficient

NAURA Technology  Allied Machinery

Very weak diversification

The 3 months correlation between NAURA and Allied is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NAURA Technology Group and Allied Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Machinery 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 Allied Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Machinery has no effect on the direction of NAURA Technology i.e., NAURA Technology and Allied Machinery go up and down completely randomly.

Pair Corralation between NAURA Technology and Allied Machinery

Assuming the 90 days trading horizon NAURA Technology Group is expected to under-perform the Allied Machinery. But the stock apears to be less risky and, when comparing its historical volatility, NAURA Technology Group is 1.95 times less risky than Allied Machinery. The stock trades about -0.13 of its potential returns per unit of risk. The Allied Machinery Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,628  in Allied Machinery Co on October 6, 2024 and sell it today you would earn a total of  91.00  from holding Allied Machinery Co or generate 5.59% return on investment over 90 days.

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

NAURA Technology Group  vs.  Allied Machinery Co

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.

Allied Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Machinery Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allied Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAURA Technology and Allied Machinery

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

The idea behind NAURA Technology Group and Allied Machinery 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.