Correlation Between NeoPharm and MegaStudy

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

By analyzing existing cross correlation between NeoPharm LTD and MegaStudy Co, you can compare the effects of market volatilities on NeoPharm and MegaStudy 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 NeoPharm with a short position of MegaStudy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NeoPharm and MegaStudy.

Diversification Opportunities for NeoPharm and MegaStudy

-0.45

Correlation Coefficient

NeoPharm  MegaStudy

Very good diversification

The 3 months correlation between NeoPharm and MegaStudy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding NeoPharm LTD and MegaStudy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MegaStudy and NeoPharm 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 NeoPharm LTD are associated (or correlated) with MegaStudy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MegaStudy has no effect on the direction of NeoPharm i.e., NeoPharm and MegaStudy go up and down completely randomly.

Pair Corralation between NeoPharm and MegaStudy

Assuming the 90 days trading horizon NeoPharm LTD is expected to generate 5.46 times more return on investment than MegaStudy. However, NeoPharm is 5.46 times more volatile than MegaStudy Co. It trades about 0.05 of its potential returns per unit of risk. MegaStudy Co is currently generating about 0.11 per unit of risk. If you would invest  1,120,000  in NeoPharm LTD on September 19, 2024 and sell it today you would earn a total of  80,000  from holding NeoPharm LTD or generate 7.14% return on investment over 90 days.

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

NeoPharm LTD  vs.  MegaStudy Co

NeoPharm LTD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NeoPharm LTD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NeoPharm may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MegaStudy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MegaStudy Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MegaStudy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NeoPharm and MegaStudy

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

The idea behind NeoPharm LTD and MegaStudy Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.