Correlation Between Cantabil Retail and Newgen Software

Can any of the company-specific risk be diversified away by investing in both Cantabil Retail and Newgen Software 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 Cantabil Retail and Newgen Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cantabil Retail India and Newgen Software Technologies, you can compare the effects of market volatilities on Cantabil Retail and Newgen Software 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 Cantabil Retail with a short position of Newgen Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cantabil Retail and Newgen Software.

Diversification Opportunities for Cantabil Retail and Newgen Software

0.87

Correlation Coefficient

Cantabil Retail  Newgen Software

Very poor diversification

The 3 months correlation between Cantabil and Newgen is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cantabil Retail India and Newgen Software Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newgen Software Tech and Cantabil Retail 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 Cantabil Retail India are associated (or correlated) with Newgen Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newgen Software Tech has no effect on the direction of Cantabil Retail i.e., Cantabil Retail and Newgen Software go up and down completely randomly.

Pair Corralation between Cantabil Retail and Newgen Software

Assuming the 90 days trading horizon Cantabil Retail is expected to generate 1.41 times less return on investment than Newgen Software. In addition to that, Cantabil Retail is 1.13 times more volatile than Newgen Software Technologies. It trades about 0.35 of its total potential returns per unit of risk. Newgen Software Technologies is currently generating about 0.56 per unit of volatility. If you would invest  130,150  in Newgen Software Technologies on October 5, 2024 and sell it today you would earn a total of  41,730  from holding Newgen Software Technologies or generate 32.06% return on investment over 90 days.

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

Cantabil Retail India  vs.  Newgen Software Technologies

Cantabil Retail India

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Cantabil Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Newgen Software Tech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Newgen Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cantabil Retail and Newgen Software

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

The idea behind Cantabil Retail India and Newgen Software 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.