Correlation Between China Galaxy and NAURA Technology

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

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

Diversification Opportunities for China Galaxy and NAURA Technology

0.88

Correlation Coefficient

China Galaxy  NAURA Technology

Very poor diversification

The 3 months correlation between China and NAURA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding China Galaxy Securities and NAURA Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAURA Technology and China Galaxy 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 China Galaxy Securities 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 China Galaxy i.e., China Galaxy and NAURA Technology go up and down completely randomly.

Pair Corralation between China Galaxy and NAURA Technology

Assuming the 90 days trading horizon China Galaxy is expected to generate 1.04 times less return on investment than NAURA Technology. In addition to that, China Galaxy is 1.01 times more volatile than NAURA Technology Group. It trades about 0.06 of its total potential returns per unit of risk. NAURA Technology Group is currently generating about 0.06 per unit of volatility. If you would invest  22,848  in NAURA Technology Group on September 28, 2024 and sell it today you would earn a total of  17,680  from holding NAURA Technology Group or generate 77.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

China Galaxy Securities  vs.  NAURA Technology Group

China Galaxy Securities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Galaxy Securities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Galaxy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NAURA Technology

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NAURA Technology Group are ranked lower than 5 (%) 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 China Galaxy and NAURA Technology

The main advantage of trading using opposite China Galaxy and NAURA Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Galaxy 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 China Galaxy Securities 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.