Correlation Between Hannong Chemicals and THiRA UTECH

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

By analyzing existing cross correlation between Hannong Chemicals and THiRA UTECH LTD, you can compare the effects of market volatilities on Hannong Chemicals and THiRA UTECH 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 Hannong Chemicals with a short position of THiRA UTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hannong Chemicals and THiRA UTECH.

Diversification Opportunities for Hannong Chemicals and THiRA UTECH

0.73

Correlation Coefficient

Hannong Chemicals  THiRA UTECH

Poor diversification

The 3 months correlation between Hannong and THiRA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hannong Chemicals and THiRA UTECH LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THiRA UTECH LTD and Hannong 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 Hannong Chemicals are associated (or correlated) with THiRA UTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THiRA UTECH LTD has no effect on the direction of Hannong Chemicals i.e., Hannong Chemicals and THiRA UTECH go up and down completely randomly.

Pair Corralation between Hannong Chemicals and THiRA UTECH

Assuming the 90 days trading horizon Hannong Chemicals is expected to generate 3.34 times less return on investment than THiRA UTECH. In addition to that, Hannong Chemicals is 1.19 times more volatile than THiRA UTECH LTD. It trades about 0.01 of its total potential returns per unit of risk. THiRA UTECH LTD is currently generating about 0.03 per unit of volatility. If you would invest  487,000  in THiRA UTECH LTD on October 26, 2024 and sell it today you would earn a total of  60,000  from holding THiRA UTECH LTD or generate 12.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

Hannong Chemicals  vs.  THiRA UTECH LTD

Hannong Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hannong Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

THiRA UTECH LTD

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days THiRA UTECH LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, THiRA UTECH is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hannong Chemicals and THiRA UTECH

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

The idea behind Hannong Chemicals and THiRA UTECH LTD 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.