Correlation Between NRB Industrial and Neogen Chemicals

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

By analyzing existing cross correlation between NRB Industrial Bearings and Neogen Chemicals Limited, you can compare the effects of market volatilities on NRB Industrial and Neogen 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 NRB Industrial with a short position of Neogen Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRB Industrial and Neogen Chemicals.

Diversification Opportunities for NRB Industrial and Neogen Chemicals

-0.53

Correlation Coefficient

NRB Industrial  Neogen Chemicals

Excellent diversification

The 3 months correlation between NRB and Neogen is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and Neogen Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neogen Chemicals and NRB Industrial 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 NRB Industrial Bearings are associated (or correlated) with Neogen Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neogen Chemicals has no effect on the direction of NRB Industrial i.e., NRB Industrial and Neogen Chemicals go up and down completely randomly.

Pair Corralation between NRB Industrial and Neogen Chemicals

Assuming the 90 days trading horizon NRB Industrial Bearings is expected to under-perform the Neogen Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, NRB Industrial Bearings is 1.22 times less risky than Neogen Chemicals. The stock trades about -0.15 of its potential returns per unit of risk. The Neogen Chemicals Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  149,157  in Neogen Chemicals Limited on September 5, 2024 and sell it today you would earn a total of  64,628  from holding Neogen Chemicals Limited or generate 43.33% return on investment over 90 days.

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

NRB Industrial Bearings  vs.  Neogen Chemicals Limited

NRB Industrial Bearings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRB Industrial Bearings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 uncertain technical and fundamental indicators, Neogen Chemicals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NRB Industrial and Neogen Chemicals

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

The idea behind NRB Industrial Bearings and Neogen Chemicals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.