Correlation Between NAURA Technology and Lutian Machinery

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

Diversification Opportunities for NAURA Technology and Lutian Machinery

0.61

Correlation Coefficient

NAURA Technology  Lutian Machinery

Poor diversification

The 3 months correlation between NAURA and Lutian is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NAURA Technology Group and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian 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 Lutian Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lutian Machinery has no effect on the direction of NAURA Technology i.e., NAURA Technology and Lutian Machinery go up and down completely randomly.

Pair Corralation between NAURA Technology and Lutian Machinery

Assuming the 90 days trading horizon NAURA Technology Group is expected to under-perform the Lutian Machinery. In addition to that, NAURA Technology is 1.32 times more volatile than Lutian Machinery Co. It trades about -0.02 of its total potential returns per unit of risk. Lutian Machinery Co is currently generating about -0.01 per unit of volatility. If you would invest  1,516  in Lutian Machinery Co on October 6, 2024 and sell it today you would lose (41.00) from holding Lutian Machinery Co or give up 2.7% of portfolio value over 90 days.

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

NAURA Technology Group  vs.  Lutian 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.

Lutian Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NAURA Technology and Lutian Machinery

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

The idea behind NAURA Technology Group and Lutian 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.