Correlation Between Newgen Software and Zydus Wellness

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

Diversification Opportunities for Newgen Software and Zydus Wellness

0.22

Correlation Coefficient

Newgen Software  Zydus Wellness

Modest diversification

The 3 months correlation between Newgen and Zydus is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Newgen Software Technologies and Zydus Wellness Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zydus Wellness 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 Zydus Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zydus Wellness has no effect on the direction of Newgen Software i.e., Newgen Software and Zydus Wellness go up and down completely randomly.

Pair Corralation between Newgen Software and Zydus Wellness

Assuming the 90 days trading horizon Newgen Software Technologies is expected to generate 1.95 times more return on investment than Zydus Wellness. However, Newgen Software is 1.95 times more volatile than Zydus Wellness Limited. It trades about 0.09 of its potential returns per unit of risk. Zydus Wellness Limited is currently generating about -0.03 per unit of risk. If you would invest  127,735  in Newgen Software Technologies on September 19, 2024 and sell it today you would earn a total of  22,105  from holding Newgen Software Technologies or generate 17.31% return on investment over 90 days.

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

Newgen Software Technologies  vs.  Zydus Wellness Limited

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.

Zydus Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zydus Wellness Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zydus Wellness is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Newgen Software and Zydus Wellness

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

The idea behind Newgen Software Technologies and Zydus Wellness Limited 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.