Correlation Between Generic Engineering and Thirumalai Chemicals

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

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

Diversification Opportunities for Generic Engineering and Thirumalai Chemicals

0.54

Correlation Coefficient

Generic Engineering  Thirumalai Chemicals

Very weak diversification

The 3 months correlation between Generic and Thirumalai is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi and Thirumalai Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thirumalai Chemicals and Generic Engineering 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 Generic Engineering Construction 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 Generic Engineering i.e., Generic Engineering and Thirumalai Chemicals go up and down completely randomly.

Pair Corralation between Generic Engineering and Thirumalai Chemicals

Assuming the 90 days trading horizon Generic Engineering Construction is expected to under-perform the Thirumalai Chemicals. In addition to that, Generic Engineering is 1.25 times more volatile than Thirumalai Chemicals Limited. It trades about 0.0 of its total potential returns per unit of risk. Thirumalai Chemicals Limited is currently generating about 0.05 per unit of volatility. If you would invest  19,863  in Thirumalai Chemicals Limited on October 4, 2024 and sell it today you would earn a total of  12,217  from holding Thirumalai Chemicals Limited or generate 61.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Generic Engineering Constructi  vs.  Thirumalai Chemicals Limited

Generic Engineering

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Generic Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Thirumalai Chemicals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thirumalai Chemicals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Generic Engineering and Thirumalai Chemicals

The main advantage of trading using opposite Generic Engineering and Thirumalai Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generic Engineering 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 Generic Engineering Construction 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.