Correlation Between Neogen Chemicals and Raj Rayon

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

Diversification Opportunities for Neogen Chemicals and Raj Rayon

0.28

Correlation Coefficient

Neogen Chemicals  Raj Rayon

Modest diversification

The 3 months correlation between Neogen and Raj is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Neogen Chemicals Limited and Raj Rayon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raj Rayon Industries 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 Raj Rayon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raj Rayon Industries has no effect on the direction of Neogen Chemicals i.e., Neogen Chemicals and Raj Rayon go up and down completely randomly.

Pair Corralation between Neogen Chemicals and Raj Rayon

Assuming the 90 days trading horizon Neogen Chemicals Limited is expected to generate 1.48 times more return on investment than Raj Rayon. However, Neogen Chemicals is 1.48 times more volatile than Raj Rayon Industries. It trades about 0.05 of its potential returns per unit of risk. Raj Rayon Industries is currently generating about -0.11 per unit of risk. If you would invest  119,443  in Neogen Chemicals Limited on October 24, 2024 and sell it today you would earn a total of  79,737  from holding Neogen Chemicals Limited or generate 66.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Neogen Chemicals Limited  vs.  Raj Rayon Industries

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Raj Rayon Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raj Rayon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Neogen Chemicals and Raj Rayon

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

The idea behind Neogen Chemicals Limited and Raj Rayon Industries 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.