Correlation Between Jizhong Energy and NAURA Technology

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

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

Diversification Opportunities for Jizhong Energy and NAURA Technology

0.68

Correlation Coefficient

Jizhong Energy  NAURA Technology

Poor diversification

The 3 months correlation between Jizhong and NAURA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Jizhong Energy Resources and NAURA Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAURA Technology and Jizhong Energy 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 Jizhong Energy Resources 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 Jizhong Energy i.e., Jizhong Energy and NAURA Technology go up and down completely randomly.

Pair Corralation between Jizhong Energy and NAURA Technology

Assuming the 90 days trading horizon Jizhong Energy is expected to generate 2.56 times less return on investment than NAURA Technology. But when comparing it to its historical volatility, Jizhong Energy Resources is 1.51 times less risky than NAURA Technology. It trades about 0.11 of its potential returns per unit of risk. NAURA Technology Group is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  28,386  in NAURA Technology Group on September 23, 2024 and sell it today you would earn a total of  13,034  from holding NAURA Technology Group or generate 45.92% return on investment over 90 days.

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

Jizhong Energy Resources  vs.  NAURA Technology Group

Jizhong Energy Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jizhong Energy Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jizhong Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

NAURA Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NAURA Technology Group are ranked lower than 14 (%) 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 Jizhong Energy and NAURA Technology

The main advantage of trading using opposite Jizhong Energy and NAURA Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jizhong Energy 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 Jizhong Energy Resources 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.