Correlation Between Ravi Kumar and Newgen Software

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

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

Diversification Opportunities for Ravi Kumar and Newgen Software

0.6

Correlation Coefficient

Ravi Kumar  Newgen Software

Poor diversification

The 3 months correlation between Ravi and Newgen is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ravi Kumar Distilleries and Newgen Software Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newgen Software Tech and Ravi Kumar 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 Ravi Kumar Distilleries are associated (or correlated) with Newgen Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newgen Software Tech has no effect on the direction of Ravi Kumar i.e., Ravi Kumar and Newgen Software go up and down completely randomly.

Pair Corralation between Ravi Kumar and Newgen Software

Assuming the 90 days trading horizon Ravi Kumar is expected to generate 3.36 times less return on investment than Newgen Software. But when comparing it to its historical volatility, Ravi Kumar Distilleries is 1.51 times less risky than Newgen Software. It trades about 0.31 of its potential returns per unit of risk. Newgen Software Technologies is currently generating about 0.69 of returns per unit of risk over similar time horizon. If you would invest  111,980  in Newgen Software Technologies on September 25, 2024 and sell it today you would earn a total of  46,555  from holding Newgen Software Technologies or generate 41.57% return on investment over 90 days.

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

Ravi Kumar Distilleries  vs.  Newgen Software Technologies

Ravi Kumar Distilleries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ravi Kumar Distilleries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ravi Kumar is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Newgen Software Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 8 (%) 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.

Pair Trading with Ravi Kumar and Newgen Software

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

The idea behind Ravi Kumar Distilleries and Newgen Software Technologies 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.