Correlation Between Neogen Chemicals and Fertilizers

Can any of the company-specific risk be diversified away by investing in both Neogen Chemicals and Fertilizers 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 Fertilizers 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 Fertilizers and Chemicals, you can compare the effects of market volatilities on Neogen Chemicals and Fertilizers 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 Fertilizers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neogen Chemicals and Fertilizers.

Diversification Opportunities for Neogen Chemicals and Fertilizers

0.49

Correlation Coefficient

Neogen Chemicals  Fertilizers

Very weak diversification

The 3 months correlation between Neogen and Fertilizers is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Neogen Chemicals Limited and Fertilizers and Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fertilizers and Chemicals 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 Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fertilizers and Chemicals has no effect on the direction of Neogen Chemicals i.e., Neogen Chemicals and Fertilizers go up and down completely randomly.

Pair Corralation between Neogen Chemicals and Fertilizers

Assuming the 90 days trading horizon Neogen Chemicals is expected to generate 1.39 times less return on investment than Fertilizers. But when comparing it to its historical volatility, Neogen Chemicals Limited is 1.06 times less risky than Fertilizers. It trades about 0.24 of its potential returns per unit of risk. Fertilizers and Chemicals is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  81,815  in Fertilizers and Chemicals on September 20, 2024 and sell it today you would earn a total of  18,325  from holding Fertilizers and Chemicals or generate 22.4% return on investment over 90 days.

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

Neogen Chemicals Limited  vs.  Fertilizers and Chemicals

Neogen Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fertilizers and Chemicals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fertilizers and Chemicals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fertilizers is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Neogen Chemicals and Fertilizers

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

The idea behind Neogen Chemicals Limited and Fertilizers and Chemicals 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.