Correlation Between NPK International and Recon Technology

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

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

Diversification Opportunities for NPK International and Recon Technology

0.48

Correlation Coefficient

NPK International  Recon Technology

Very weak diversification

The 3 months correlation between NPK and Recon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NPK International and Recon Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recon Technology and NPK International 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 NPK International are associated (or correlated) with Recon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recon Technology has no effect on the direction of NPK International i.e., NPK International and Recon Technology go up and down completely randomly.

Pair Corralation between NPK International and Recon Technology

Given the investment horizon of 90 days NPK International is expected to generate 8.34 times less return on investment than Recon Technology. But when comparing it to its historical volatility, NPK International is 7.5 times less risky than Recon Technology. It trades about 0.1 of its potential returns per unit of risk. Recon Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  189.00  in Recon Technology on May 4, 2025 and sell it today you would earn a total of  92.00  from holding Recon Technology or generate 48.68% return on investment over 90 days.

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

NPK International  vs.  Recon Technology

NPK International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NPK International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting forward-looking signals, NPK International may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Recon Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Recon Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Recon Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NPK International and Recon Technology

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

The idea behind NPK International and Recon 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.