Correlation Between Niagara Mohawk and NetSol Technologies

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

Diversification Opportunities for Niagara Mohawk and NetSol Technologies

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Niagara and NetSol is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Niagara Mohawk Power and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies and Niagara Mohawk 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 Niagara Mohawk Power are associated (or correlated) with NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of Niagara Mohawk i.e., Niagara Mohawk and NetSol Technologies go up and down completely randomly.

Pair Corralation between Niagara Mohawk and NetSol Technologies

Assuming the 90 days horizon Niagara Mohawk is expected to generate 1.51 times less return on investment than NetSol Technologies. But when comparing it to its historical volatility, Niagara Mohawk Power is 2.36 times less risky than NetSol Technologies. It trades about 0.07 of its potential returns per unit of risk. NetSol Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  220.00  in NetSol Technologies on August 25, 2024 and sell it today you would earn a total of  48.00  from holding NetSol Technologies or generate 21.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy63.76%
ValuesDaily Returns

Niagara Mohawk Power  vs.  NetSol Technologies

 Performance 
       Timeline  
Niagara Mohawk Power 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Niagara Mohawk Power are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Niagara Mohawk may actually be approaching a critical reversion point that can send shares even higher in December 2024.
NetSol Technologies 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in NetSol Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, NetSol Technologies is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Niagara Mohawk and NetSol Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Niagara Mohawk and NetSol Technologies

The main advantage of trading using opposite Niagara Mohawk and NetSol Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Niagara Mohawk position performs unexpectedly, NetSol Technologies 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 NetSol Technologies will offset losses from the drop in NetSol Technologies' long position.
The idea behind Niagara Mohawk Power and NetSol Technologies 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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