Correlation Between Hindustan Construction and Newgen Software

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

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

Diversification Opportunities for Hindustan Construction and Newgen Software

0.64

Correlation Coefficient

Hindustan Construction  Newgen Software

Poor diversification

The 3 months correlation between Hindustan and Newgen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Construction 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 Hindustan Construction 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 Hindustan Construction 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 Hindustan Construction i.e., Hindustan Construction and Newgen Software go up and down completely randomly.

Pair Corralation between Hindustan Construction and Newgen Software

Assuming the 90 days trading horizon Hindustan Construction is expected to generate 1.42 times less return on investment than Newgen Software. In addition to that, Hindustan Construction is 1.24 times more volatile than Newgen Software Technologies. It trades about 0.07 of its total potential returns per unit of risk. Newgen Software Technologies is currently generating about 0.13 per unit of volatility. If you would invest  56,071  in Newgen Software Technologies on September 19, 2024 and sell it today you would earn a total of  93,774  from holding Newgen Software Technologies or generate 167.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.3%
Values	Daily Returns

Hindustan Construction  vs.  Newgen Software Technologies

Hindustan Construction

Risk-Adjusted Performance

3 of 100

Insignificant

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

Newgen Software Tech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating 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 Hindustan Construction and Newgen Software

The main advantage of trading using opposite Hindustan Construction and Newgen Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindustan Construction 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 Hindustan Construction 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 CEOs Directory module to screen CEOs from public companies around the world.