Correlation Between Neogen Chemicals and Spencers Retail

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

Diversification Opportunities for Neogen Chemicals and Spencers Retail

0.46

Correlation Coefficient

Neogen Chemicals  Spencers Retail

Very weak diversification

The 3 months correlation between Neogen and Spencers is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Neogen Chemicals Limited and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail 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 Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of Neogen Chemicals i.e., Neogen Chemicals and Spencers Retail go up and down completely randomly.

Pair Corralation between Neogen Chemicals and Spencers Retail

Assuming the 90 days trading horizon Neogen Chemicals Limited is expected to under-perform the Spencers Retail. But the stock apears to be less risky and, when comparing its historical volatility, Neogen Chemicals Limited is 1.14 times less risky than Spencers Retail. The stock trades about -0.02 of its potential returns per unit of risk. The Spencers Retail Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,191  in Spencers Retail Limited on October 25, 2024 and sell it today you would earn a total of  119.00  from holding Spencers Retail Limited or generate 1.45% 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.  Spencers Retail Limited

Neogen Chemicals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neogen Chemicals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Neogen Chemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Spencers Retail is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Neogen Chemicals and Spencers Retail

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

The idea behind Neogen Chemicals Limited and Spencers Retail 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.