Correlation Between Newgen Software and IOL Chemicals

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

Diversification Opportunities for Newgen Software and IOL Chemicals

0.57

Correlation Coefficient

Newgen Software  IOL Chemicals

Very weak diversification

The 3 months correlation between Newgen and IOL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Newgen Software Technologies and IOL Chemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IOL Chemicals 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 IOL Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IOL Chemicals has no effect on the direction of Newgen Software i.e., Newgen Software and IOL Chemicals go up and down completely randomly.

Pair Corralation between Newgen Software and IOL Chemicals

Assuming the 90 days trading horizon Newgen Software Technologies is expected to generate 1.38 times more return on investment than IOL Chemicals. However, Newgen Software is 1.38 times more volatile than IOL Chemicals and. It trades about 0.13 of its potential returns per unit of risk. IOL Chemicals and is currently generating about 0.02 per unit of risk. If you would invest  131,405  in Newgen Software Technologies on October 10, 2024 and sell it today you would earn a total of  36,665  from holding Newgen Software Technologies or generate 27.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Newgen Software Technologies  vs.  IOL Chemicals and

Newgen Software Tech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Newgen Software sustained solid returns over the last few months and may actually be approaching a breakup point.

IOL Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IOL Chemicals and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IOL Chemicals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Newgen Software and IOL Chemicals

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

The idea behind Newgen Software Technologies and IOL Chemicals and 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.