Correlation Between Newgen Software and Lotus Eye

Can any of the company-specific risk be diversified away by investing in both Newgen Software and Lotus Eye 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 Lotus Eye 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 Lotus Eye Hospital, you can compare the effects of market volatilities on Newgen Software and Lotus Eye 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 Lotus Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newgen Software and Lotus Eye.

Diversification Opportunities for Newgen Software and Lotus Eye

0.09

Correlation Coefficient

Newgen Software  Lotus Eye

Significant diversification

The 3 months correlation between Newgen and Lotus is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Newgen Software Technologies and Lotus Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Eye Hospital 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 Lotus Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Eye Hospital has no effect on the direction of Newgen Software i.e., Newgen Software and Lotus Eye go up and down completely randomly.

Pair Corralation between Newgen Software and Lotus Eye

Assuming the 90 days trading horizon Newgen Software Technologies is expected to generate 1.43 times more return on investment than Lotus Eye. However, Newgen Software is 1.43 times more volatile than Lotus Eye Hospital. It trades about 0.07 of its potential returns per unit of risk. Lotus Eye Hospital is currently generating about -0.02 per unit of risk. If you would invest  108,260  in Newgen Software Technologies on September 5, 2024 and sell it today you would earn a total of  12,890  from holding Newgen Software Technologies or generate 11.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Newgen Software Technologies  vs.  Lotus Eye Hospital

Newgen Software Tech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Newgen Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Lotus Eye Hospital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Eye Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Lotus Eye is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Newgen Software and Lotus Eye

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

The idea behind Newgen Software Technologies and Lotus Eye Hospital 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.