Correlation Between JB Chemicals and Neogen Chemicals

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

By analyzing existing cross correlation between JB Chemicals Pharmaceuticals and Neogen Chemicals Limited, you can compare the effects of market volatilities on JB Chemicals and Neogen Chemicals 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 JB Chemicals with a short position of Neogen Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of JB Chemicals and Neogen Chemicals.

Diversification Opportunities for JB Chemicals and Neogen Chemicals

0.02

Correlation Coefficient

JB Chemicals  Neogen Chemicals

Significant diversification

The 3 months correlation between JBCHEPHARM and Neogen is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding JB Chemicals Pharmaceuticals and Neogen Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neogen Chemicals and JB Chemicals 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 JB Chemicals Pharmaceuticals are associated (or correlated) with Neogen Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neogen Chemicals has no effect on the direction of JB Chemicals i.e., JB Chemicals and Neogen Chemicals go up and down completely randomly.

Pair Corralation between JB Chemicals and Neogen Chemicals

Assuming the 90 days trading horizon JB Chemicals Pharmaceuticals is expected to under-perform the Neogen Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, JB Chemicals Pharmaceuticals is 2.15 times less risky than Neogen Chemicals. The stock trades about -0.02 of its potential returns per unit of risk. The Neogen Chemicals Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  160,205  in Neogen Chemicals Limited on September 15, 2024 and sell it today you would earn a total of  58,135  from holding Neogen Chemicals Limited or generate 36.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

JB Chemicals Pharmaceuticals  vs.  Neogen Chemicals Limited

JB Chemicals Pharmac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JB Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, JB Chemicals is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Neogen Chemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neogen Chemicals Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Neogen Chemicals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JB Chemicals and Neogen Chemicals

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

The idea behind JB Chemicals Pharmaceuticals and Neogen Chemicals Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.