Correlation Between NAT ABSOLUTE and AJ Advance

Can any of the company-specific risk be diversified away by investing in both NAT ABSOLUTE and AJ Advance 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 NAT ABSOLUTE and AJ Advance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NAT ABSOLUTE TECHNOLOGIES and AJ Advance Technology, you can compare the effects of market volatilities on NAT ABSOLUTE and AJ Advance 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 NAT ABSOLUTE with a short position of AJ Advance. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAT ABSOLUTE and AJ Advance.

Diversification Opportunities for NAT ABSOLUTE and AJ Advance

0.86

Correlation Coefficient

NAT ABSOLUTE  AJ Advance

Very poor diversification

The 3 months correlation between NAT and AJA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NAT ABSOLUTE TECHNOLOGIES and AJ Advance Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Advance Technology and NAT ABSOLUTE 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 NAT ABSOLUTE TECHNOLOGIES are associated (or correlated) with AJ Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Advance Technology has no effect on the direction of NAT ABSOLUTE i.e., NAT ABSOLUTE and AJ Advance go up and down completely randomly.

Pair Corralation between NAT ABSOLUTE and AJ Advance

Assuming the 90 days trading horizon NAT ABSOLUTE TECHNOLOGIES is expected to generate 0.29 times more return on investment than AJ Advance. However, NAT ABSOLUTE TECHNOLOGIES is 3.48 times less risky than AJ Advance. It trades about -0.17 of its potential returns per unit of risk. AJ Advance Technology is currently generating about -0.07 per unit of risk. If you would invest  462.00  in NAT ABSOLUTE TECHNOLOGIES on October 6, 2024 and sell it today you would lose (18.00) from holding NAT ABSOLUTE TECHNOLOGIES or give up 3.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

NAT ABSOLUTE TECHNOLOGIES  vs.  AJ Advance Technology

NAT ABSOLUTE TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAT ABSOLUTE TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

AJ Advance Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AJ Advance Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with NAT ABSOLUTE and AJ Advance

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

The idea behind NAT ABSOLUTE TECHNOLOGIES and AJ Advance Technology 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.