Correlation Between Newgen Software and Gujarat Lease

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

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

Diversification Opportunities for Newgen Software and Gujarat Lease

-0.32

Correlation Coefficient

Newgen Software  Gujarat Lease

Very good diversification

The 3 months correlation between Newgen and Gujarat is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Newgen Software Technologies and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing and Newgen Software 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 Newgen Software Technologies are associated (or correlated) with Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Newgen Software i.e., Newgen Software and Gujarat Lease go up and down completely randomly.

Pair Corralation between Newgen Software and Gujarat Lease

Assuming the 90 days trading horizon Newgen Software Technologies is expected to generate 1.58 times more return on investment than Gujarat Lease. However, Newgen Software is 1.58 times more volatile than Gujarat Lease Financing. It trades about 0.06 of its potential returns per unit of risk. Gujarat Lease Financing is currently generating about 0.03 per unit of risk. If you would invest  108,000  in Newgen Software Technologies on September 2, 2024 and sell it today you would earn a total of  10,050  from holding Newgen Software Technologies or generate 9.31% return on investment over 90 days.

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

Newgen Software Technologies  vs.  Gujarat Lease Financing

Newgen Software Tech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Newgen Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Gujarat Lease Financing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gujarat Lease is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Newgen Software and Gujarat Lease

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

The idea behind Newgen Software Technologies and Gujarat Lease Financing 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.