Correlation Between Hathway Cable and Thirumalai Chemicals

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

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

Diversification Opportunities for Hathway Cable and Thirumalai Chemicals

-0.41

Correlation Coefficient

Hathway Cable  Thirumalai Chemicals

Very good diversification

The 3 months correlation between Hathway and Thirumalai is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hathway Cable Datacom and Thirumalai Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thirumalai Chemicals and Hathway Cable 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 Hathway Cable Datacom 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 Hathway Cable i.e., Hathway Cable and Thirumalai Chemicals go up and down completely randomly.

Pair Corralation between Hathway Cable and Thirumalai Chemicals

Assuming the 90 days trading horizon Hathway Cable is expected to generate 7.96 times less return on investment than Thirumalai Chemicals. But when comparing it to its historical volatility, Hathway Cable Datacom is 1.06 times less risky than Thirumalai Chemicals. It trades about 0.01 of its potential returns per unit of risk. Thirumalai Chemicals Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20,466  in Thirumalai Chemicals Limited on September 26, 2024 and sell it today you would earn a total of  12,159  from holding Thirumalai Chemicals Limited or generate 59.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Hathway Cable Datacom  vs.  Thirumalai Chemicals Limited

Hathway Cable Datacom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hathway Cable Datacom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Hathway Cable and Thirumalai Chemicals

The main advantage of trading using opposite Hathway Cable and Thirumalai Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hathway Cable 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 Hathway Cable Datacom 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.