Correlation Between Neogen Chemicals and Nippon Life

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

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

Diversification Opportunities for Neogen Chemicals and Nippon Life

0.17

Correlation Coefficient

Neogen Chemicals  Nippon Life

Average diversification

The 3 months correlation between Neogen and Nippon is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Neogen Chemicals Limited and Nippon Life India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Life India and Neogen Chemicals 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 Neogen Chemicals Limited are associated (or correlated) with Nippon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Life India has no effect on the direction of Neogen Chemicals i.e., Neogen Chemicals and Nippon Life go up and down completely randomly.

Pair Corralation between Neogen Chemicals and Nippon Life

Assuming the 90 days trading horizon Neogen Chemicals Limited is expected to generate 1.83 times more return on investment than Nippon Life. However, Neogen Chemicals is 1.83 times more volatile than Nippon Life India. It trades about -0.04 of its potential returns per unit of risk. Nippon Life India is currently generating about -0.07 per unit of risk. If you would invest  216,870  in Neogen Chemicals Limited on September 2, 2024 and sell it today you would lose (7,250) from holding Neogen Chemicals Limited or give up 3.34% of portfolio value over 90 days.

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

Neogen Chemicals Limited  vs.  Nippon Life India

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

Nippon Life India

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Life India are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Nippon Life is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Neogen Chemicals and Nippon Life

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

The idea behind Neogen Chemicals Limited and Nippon Life India 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 Global Correlations module to find global opportunities by holding instruments from different markets.