Correlation Between Newgen Software and Arvind

Can any of the company-specific risk be diversified away by investing in both Newgen Software and Arvind 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 Newgen Software and Arvind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Newgen Software Technologies and Arvind Limited, you can compare the effects of market volatilities on Newgen Software and Arvind 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 Newgen Software with a short position of Arvind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newgen Software and Arvind.

Diversification Opportunities for Newgen Software and Arvind

0.7

Correlation Coefficient

Newgen Software  Arvind

Poor diversification

The 3 months correlation between Newgen and Arvind is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Newgen Software Technologies and Arvind Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arvind Limited and Newgen Software 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 Newgen Software Technologies are associated (or correlated) with Arvind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arvind Limited has no effect on the direction of Newgen Software i.e., Newgen Software and Arvind go up and down completely randomly.

Pair Corralation between Newgen Software and Arvind

Assuming the 90 days trading horizon Newgen Software Technologies is expected to generate 1.04 times more return on investment than Arvind. However, Newgen Software is 1.04 times more volatile than Arvind Limited. It trades about 0.12 of its potential returns per unit of risk. Arvind Limited is currently generating about 0.09 per unit of risk. If you would invest  123,400  in Newgen Software Technologies on October 23, 2024 and sell it today you would earn a total of  33,075  from holding Newgen Software Technologies or generate 26.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Newgen Software Technologies  vs.  Arvind Limited

Newgen Software Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Newgen Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Arvind Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arvind Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Arvind sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newgen Software and Arvind

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

The idea behind Newgen Software Technologies and Arvind 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.