Correlation Between ZF Commercial and Newgen Software

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

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

Diversification Opportunities for ZF Commercial and Newgen Software

0.24

Correlation Coefficient

ZF Commercial  Newgen Software

Modest diversification

The 3 months correlation between ZFCVINDIA and Newgen is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle 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 ZF Commercial 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 ZF Commercial Vehicle 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 ZF Commercial i.e., ZF Commercial and Newgen Software go up and down completely randomly.

Pair Corralation between ZF Commercial and Newgen Software

Assuming the 90 days trading horizon ZF Commercial Vehicle is expected to generate 0.64 times more return on investment than Newgen Software. However, ZF Commercial Vehicle is 1.57 times less risky than Newgen Software. It trades about 0.05 of its potential returns per unit of risk. Newgen Software Technologies is currently generating about -0.18 per unit of risk. If you would invest  1,191,815  in ZF Commercial Vehicle on December 28, 2024 and sell it today you would earn a total of  73,680  from holding ZF Commercial Vehicle or generate 6.18% return on investment over 90 days.

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

ZF Commercial Vehicle  vs.  Newgen Software Technologies

ZF Commercial Vehicle

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZF Commercial Vehicle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ZF Commercial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Newgen Software Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newgen Software Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ZF Commercial and Newgen Software

The main advantage of trading using opposite ZF Commercial and Newgen Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZF Commercial 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 ZF Commercial Vehicle 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.