Correlation Between Neogen Chemicals and UPL

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

Diversification Opportunities for Neogen Chemicals and UPL

0.29

Correlation Coefficient

Neogen Chemicals  UPL

Modest diversification

The 3 months correlation between Neogen and UPL is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Neogen Chemicals Limited and UPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPL Limited 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 UPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPL Limited has no effect on the direction of Neogen Chemicals i.e., Neogen Chemicals and UPL go up and down completely randomly.

Pair Corralation between Neogen Chemicals and UPL

Assuming the 90 days trading horizon Neogen Chemicals Limited is expected to generate 1.46 times more return on investment than UPL. However, Neogen Chemicals is 1.46 times more volatile than UPL Limited. It trades about 0.07 of its potential returns per unit of risk. UPL Limited is currently generating about -0.02 per unit of risk. If you would invest  149,577  in Neogen Chemicals Limited on October 5, 2024 and sell it today you would earn a total of  68,613  from holding Neogen Chemicals Limited or generate 45.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.24%
Values	Daily Returns

Neogen Chemicals Limited  vs.  UPL Limited

Neogen Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neogen Chemicals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Neogen Chemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

UPL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UPL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Neogen Chemicals and UPL

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

The idea behind Neogen Chemicals Limited and UPL 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.