Correlation Between Hindalco Industries and Newgen Software

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

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

Diversification Opportunities for Hindalco Industries and Newgen Software

0.44

Correlation Coefficient

Hindalco Industries  Newgen Software

Very weak diversification

The 3 months correlation between Hindalco and Newgen is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hindalco Industries Limited 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 Hindalco Industries 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 Hindalco Industries Limited 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 Hindalco Industries i.e., Hindalco Industries and Newgen Software go up and down completely randomly.

Pair Corralation between Hindalco Industries and Newgen Software

Assuming the 90 days trading horizon Hindalco Industries is expected to generate 15.97 times less return on investment than Newgen Software. But when comparing it to its historical volatility, Hindalco Industries Limited is 3.01 times less risky than Newgen Software. It trades about 0.1 of its potential returns per unit of risk. Newgen Software Technologies is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  104,435  in Newgen Software Technologies on September 17, 2024 and sell it today you would earn a total of  34,600  from holding Newgen Software Technologies or generate 33.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Hindalco Industries Limited  vs.  Newgen Software Technologies

Hindalco Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindalco Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Hindalco Industries is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Newgen Software Tech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating 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 Hindalco Industries and Newgen Software

The main advantage of trading using opposite Hindalco Industries and Newgen Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindalco Industries 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 Hindalco Industries Limited 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 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.