Correlation Between Penyao Environmental and NAURA Technology

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

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

Diversification Opportunities for Penyao Environmental and NAURA Technology

0.3

Correlation Coefficient

Penyao Environmental  NAURA Technology

Weak diversification

The 3 months correlation between Penyao and NAURA is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio and NAURA Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAURA Technology and Penyao Environmental 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 Penyao Environmental Protection 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 Penyao Environmental i.e., Penyao Environmental and NAURA Technology go up and down completely randomly.

Pair Corralation between Penyao Environmental and NAURA Technology

Assuming the 90 days trading horizon Penyao Environmental Protection is expected to under-perform the NAURA Technology. In addition to that, Penyao Environmental is 1.52 times more volatile than NAURA Technology Group. It trades about -0.16 of its total potential returns per unit of risk. NAURA Technology Group is currently generating about -0.12 per unit of volatility. If you would invest  39,780  in NAURA Technology Group on October 9, 2024 and sell it today you would lose (2,150) from holding NAURA Technology Group or give up 5.4% of portfolio value over 90 days.

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

Penyao Environmental Protectio  vs.  NAURA Technology Group

Penyao Environmental

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penyao Environmental Protection are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penyao Environmental 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 Penyao Environmental and NAURA Technology

The main advantage of trading using opposite Penyao Environmental and NAURA Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penyao Environmental 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 Penyao Environmental Protection 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.