Correlation Between NetSol Technologies and Crescent Star

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Can any of the company-specific risk be diversified away by investing in both NetSol Technologies and Crescent Star 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 NetSol Technologies and Crescent Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetSol Technologies and Crescent Star Insurance, you can compare the effects of market volatilities on NetSol Technologies and Crescent Star 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 NetSol Technologies with a short position of Crescent Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetSol Technologies and Crescent Star.

Diversification Opportunities for NetSol Technologies and Crescent Star

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between NetSol and Crescent is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NetSol Technologies and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance and NetSol Technologies 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 NetSol Technologies are associated (or correlated) with Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of NetSol Technologies i.e., NetSol Technologies and Crescent Star go up and down completely randomly.

Pair Corralation between NetSol Technologies and Crescent Star

Assuming the 90 days trading horizon NetSol Technologies is expected to generate 1.41 times less return on investment than Crescent Star. But when comparing it to its historical volatility, NetSol Technologies is 1.56 times less risky than Crescent Star. It trades about 0.06 of its potential returns per unit of risk. Crescent Star Insurance is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  143.00  in Crescent Star Insurance on October 30, 2024 and sell it today you would earn a total of  141.00  from holding Crescent Star Insurance or generate 98.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.38%
ValuesDaily Returns

NetSol Technologies  vs.  Crescent Star Insurance

 Performance 
       Timeline  
NetSol Technologies 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetSol Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NetSol Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.
Crescent Star Insurance 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Star Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Crescent Star sustained solid returns over the last few months and may actually be approaching a breakup point.

NetSol Technologies and Crescent Star Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NetSol Technologies and Crescent Star

The main advantage of trading using opposite NetSol Technologies and Crescent Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetSol Technologies position performs unexpectedly, Crescent Star 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 Crescent Star will offset losses from the drop in Crescent Star's long position.
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The idea behind NetSol Technologies and Crescent Star Insurance 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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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.

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