Correlation Between Neogen Chemicals and Sudarshan Chemical

Can any of the company-specific risk be diversified away by investing in both Neogen Chemicals and Sudarshan Chemical 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 Sudarshan Chemical 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 Sudarshan Chemical Industries, you can compare the effects of market volatilities on Neogen Chemicals and Sudarshan Chemical 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 Sudarshan Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neogen Chemicals and Sudarshan Chemical.

Diversification Opportunities for Neogen Chemicals and Sudarshan Chemical

0.29

Correlation Coefficient

Neogen Chemicals  Sudarshan Chemical

Modest diversification

The 3 months correlation between Neogen and Sudarshan is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Neogen Chemicals Limited and Sudarshan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sudarshan Chemical 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 Sudarshan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sudarshan Chemical has no effect on the direction of Neogen Chemicals i.e., Neogen Chemicals and Sudarshan Chemical go up and down completely randomly.

Pair Corralation between Neogen Chemicals and Sudarshan Chemical

Assuming the 90 days trading horizon Neogen Chemicals Limited is expected to under-perform the Sudarshan Chemical. In addition to that, Neogen Chemicals is 1.02 times more volatile than Sudarshan Chemical Industries. It trades about -0.04 of its total potential returns per unit of risk. Sudarshan Chemical Industries is currently generating about 0.04 per unit of volatility. If you would invest  104,660  in Sudarshan Chemical Industries on September 1, 2024 and sell it today you would earn a total of  1,935  from holding Sudarshan Chemical Industries or generate 1.85% return on investment over 90 days.

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

Neogen Chemicals Limited  vs.  Sudarshan Chemical Industries

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

Sudarshan Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sudarshan Chemical Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Sudarshan Chemical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Neogen Chemicals and Sudarshan Chemical

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

The idea behind Neogen Chemicals Limited and Sudarshan Chemical Industries 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.

Check out your portfolio center.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.