Correlation Between Alkali Metals and Texmaco Rail

Can any of the company-specific risk be diversified away by investing in both Alkali Metals and Texmaco Rail 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 Alkali Metals and Texmaco Rail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alkali Metals Limited and Texmaco Rail Engineering, you can compare the effects of market volatilities on Alkali Metals and Texmaco Rail 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 Alkali Metals with a short position of Texmaco Rail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkali Metals and Texmaco Rail.

Diversification Opportunities for Alkali Metals and Texmaco Rail

0.95

Correlation Coefficient

Alkali Metals  Texmaco Rail

Almost no diversification

The 3 months correlation between Alkali and Texmaco is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and Texmaco Rail Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texmaco Rail Engineering and Alkali Metals 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 Alkali Metals Limited are associated (or correlated) with Texmaco Rail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texmaco Rail Engineering has no effect on the direction of Alkali Metals i.e., Alkali Metals and Texmaco Rail go up and down completely randomly.

Pair Corralation between Alkali Metals and Texmaco Rail

Assuming the 90 days trading horizon Alkali Metals Limited is expected to generate 0.7 times more return on investment than Texmaco Rail. However, Alkali Metals Limited is 1.43 times less risky than Texmaco Rail. It trades about -0.15 of its potential returns per unit of risk. Texmaco Rail Engineering is currently generating about -0.13 per unit of risk. If you would invest  11,149  in Alkali Metals Limited on December 27, 2024 and sell it today you would lose (2,963) from holding Alkali Metals Limited or give up 26.58% of portfolio value over 90 days.

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

Alkali Metals Limited  vs.  Texmaco Rail Engineering

Alkali Metals Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alkali Metals Limited 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Texmaco Rail Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texmaco Rail Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Alkali Metals and Texmaco Rail

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

The idea behind Alkali Metals Limited and Texmaco Rail Engineering 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.