Correlation Between Neogen Chemicals and SANOFI S

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

Diversification Opportunities for Neogen Chemicals and SANOFI S

0.37

Correlation Coefficient

Neogen Chemicals  SANOFI S

Weak diversification

The 3 months correlation between Neogen and SANOFI is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Neogen Chemicals Limited and SANOFI S HEALTHC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANOFI S HEALTHC 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 SANOFI S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANOFI S HEALTHC has no effect on the direction of Neogen Chemicals i.e., Neogen Chemicals and SANOFI S go up and down completely randomly.

Pair Corralation between Neogen Chemicals and SANOFI S

Assuming the 90 days trading horizon Neogen Chemicals Limited is expected to generate 2.3 times more return on investment than SANOFI S. However, Neogen Chemicals is 2.3 times more volatile than SANOFI S HEALTHC. It trades about 0.15 of its potential returns per unit of risk. SANOFI S HEALTHC is currently generating about -0.01 per unit of risk. If you would invest  149,182  in Neogen Chemicals Limited on September 2, 2024 and sell it today you would earn a total of  60,438  from holding Neogen Chemicals Limited or generate 40.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.94%
Values	Daily Returns

Neogen Chemicals Limited  vs.  SANOFI S HEALTHC

Neogen Chemicals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neogen Chemicals Limited are ranked lower than 12 (%) 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.

SANOFI S HEALTHC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Neogen Chemicals and SANOFI S

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

The idea behind Neogen Chemicals Limited and SANOFI S HEALTHC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.