Correlation Between Neogen Chemicals and Agro Phos

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

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

Diversification Opportunities for Neogen Chemicals and Agro Phos

0.44

Correlation Coefficient

Neogen Chemicals  Agro Phos

Very weak diversification

The 3 months correlation between Neogen and Agro is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Neogen Chemicals Limited and Agro Phos India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Phos India and Neogen 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 Neogen Chemicals Limited are associated (or correlated) with Agro Phos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Phos India has no effect on the direction of Neogen Chemicals i.e., Neogen Chemicals and Agro Phos go up and down completely randomly.

Pair Corralation between Neogen Chemicals and Agro Phos

Assuming the 90 days trading horizon Neogen Chemicals Limited is expected to generate 2.36 times more return on investment than Agro Phos. However, Neogen Chemicals is 2.36 times more volatile than Agro Phos India. It trades about -0.03 of its potential returns per unit of risk. Agro Phos India is currently generating about -0.39 per unit of risk. If you would invest  202,545  in Neogen Chemicals Limited on October 24, 2024 and sell it today you would lose (7,630) from holding Neogen Chemicals Limited or give up 3.77% of portfolio value over 90 days.

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

Neogen Chemicals Limited  vs.  Agro Phos India

Neogen Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neogen Chemicals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Neogen Chemicals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Agro Phos India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agro Phos India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Neogen Chemicals and Agro Phos

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

The idea behind Neogen Chemicals Limited and Agro Phos India 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.