Correlation Between Neo Neon and Cal Comp

Can any of the company-specific risk be diversified away by investing in both Neo Neon and Cal Comp 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 Neo Neon and Cal Comp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Neo Neon Holdings Limited and Cal Comp Electronics Public, you can compare the effects of market volatilities on Neo Neon and Cal Comp 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 Neo Neon with a short position of Cal Comp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neo Neon and Cal Comp.

Diversification Opportunities for Neo Neon and Cal Comp

-0.45

Correlation Coefficient

Neo Neon  Cal Comp

Very good diversification

The 3 months correlation between Neo and Cal is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Neo Neon Holdings Limited and Cal Comp Electronics Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Comp Electronics and Neo Neon 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 Neo Neon Holdings Limited are associated (or correlated) with Cal Comp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Comp Electronics has no effect on the direction of Neo Neon i.e., Neo Neon and Cal Comp go up and down completely randomly.

Pair Corralation between Neo Neon and Cal Comp

Assuming the 90 days trading horizon Neo Neon Holdings Limited is expected to generate 0.47 times more return on investment than Cal Comp. However, Neo Neon Holdings Limited is 2.11 times less risky than Cal Comp. It trades about 0.12 of its potential returns per unit of risk. Cal Comp Electronics Public is currently generating about -0.06 per unit of risk. If you would invest  146.00  in Neo Neon Holdings Limited on December 2, 2024 and sell it today you would earn a total of  3.00  from holding Neo Neon Holdings Limited or generate 2.05% return on investment over 90 days.

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

Neo Neon Holdings Limited  vs.  Cal Comp Electronics Public

Neo Neon Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neo Neon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Neo Neon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cal Comp Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Comp Electronics Public has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cal Comp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Neo Neon and Cal Comp

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

The idea behind Neo Neon Holdings Limited and Cal Comp Electronics Public 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.