Correlation Between Xinke Material and NAURA Technology

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

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

Diversification Opportunities for Xinke Material and NAURA Technology

0.92

Correlation Coefficient

Xinke Material  NAURA Technology

Almost no diversification

The 3 months correlation between Xinke and NAURA is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Xinke Material and NAURA Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAURA Technology and Xinke Material 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 Xinke Material 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 Xinke Material i.e., Xinke Material and NAURA Technology go up and down completely randomly.

Pair Corralation between Xinke Material and NAURA Technology

Assuming the 90 days trading horizon Xinke Material is expected to generate 0.82 times more return on investment than NAURA Technology. However, Xinke Material is 1.22 times less risky than NAURA Technology. It trades about 0.22 of its potential returns per unit of risk. NAURA Technology Group is currently generating about 0.16 per unit of risk. If you would invest  173.00  in Xinke Material on September 5, 2024 and sell it today you would earn a total of  71.00  from holding Xinke Material or generate 41.04% return on investment over 90 days.

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

Xinke Material  vs.  NAURA Technology Group

Xinke Material

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinke Material are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinke Material sustained solid returns over the last few months and may actually be approaching a breakup point.

NAURA Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NAURA Technology Group are ranked lower than 12 (%) 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.

Pair Trading with Xinke Material and NAURA Technology

The main advantage of trading using opposite Xinke Material and NAURA Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinke Material 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 Xinke Material 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.