Correlation Between Advani Hotels and Thirumalai Chemicals

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

By analyzing existing cross correlation between Advani Hotels Resorts and Thirumalai Chemicals Limited, you can compare the effects of market volatilities on Advani Hotels and Thirumalai Chemicals 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 Advani Hotels with a short position of Thirumalai Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advani Hotels and Thirumalai Chemicals.

Diversification Opportunities for Advani Hotels and Thirumalai Chemicals

0.4

Correlation Coefficient

Advani Hotels  Thirumalai Chemicals

Very weak diversification

The 3 months correlation between Advani and Thirumalai is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Advani Hotels Resorts and Thirumalai Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thirumalai Chemicals and Advani Hotels 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 Advani Hotels Resorts are associated (or correlated) with Thirumalai Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thirumalai Chemicals has no effect on the direction of Advani Hotels i.e., Advani Hotels and Thirumalai Chemicals go up and down completely randomly.

Pair Corralation between Advani Hotels and Thirumalai Chemicals

Assuming the 90 days trading horizon Advani Hotels Resorts is expected to generate 3.15 times more return on investment than Thirumalai Chemicals. However, Advani Hotels is 3.15 times more volatile than Thirumalai Chemicals Limited. It trades about 0.05 of its potential returns per unit of risk. Thirumalai Chemicals Limited is currently generating about 0.05 per unit of risk. If you would invest  3,938  in Advani Hotels Resorts on September 24, 2024 and sell it today you would earn a total of  3,048  from holding Advani Hotels Resorts or generate 77.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Advani Hotels Resorts  vs.  Thirumalai Chemicals Limited

Advani Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advani Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Thirumalai Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thirumalai Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Thirumalai Chemicals is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Advani Hotels and Thirumalai Chemicals

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

The idea behind Advani Hotels Resorts and Thirumalai Chemicals 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.