Correlation Between Hilton Metal and Thirumalai Chemicals

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

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

Diversification Opportunities for Hilton Metal and Thirumalai Chemicals

0.57

Correlation Coefficient

Hilton Metal  Thirumalai Chemicals

Very weak diversification

The 3 months correlation between Hilton and Thirumalai is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and Thirumalai Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thirumalai Chemicals and Hilton Metal 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 Hilton Metal Forging 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 Hilton Metal i.e., Hilton Metal and Thirumalai Chemicals go up and down completely randomly.

Pair Corralation between Hilton Metal and Thirumalai Chemicals

Assuming the 90 days trading horizon Hilton Metal Forging is expected to under-perform the Thirumalai Chemicals. In addition to that, Hilton Metal is 1.25 times more volatile than Thirumalai Chemicals Limited. It trades about -0.02 of its total potential returns per unit of risk. Thirumalai Chemicals Limited is currently generating about 0.09 per unit of volatility. If you would invest  19,924  in Thirumalai Chemicals Limited on September 21, 2024 and sell it today you would earn a total of  14,551  from holding Thirumalai Chemicals Limited or generate 73.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.25%
Values	Daily Returns

Hilton Metal Forging  vs.  Thirumalai Chemicals Limited

Hilton Metal Forging

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Thirumalai Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thirumalai Chemicals Limited are ranked lower than 1 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Hilton Metal and Thirumalai Chemicals

The main advantage of trading using opposite Hilton Metal and Thirumalai Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Metal 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 Hilton Metal Forging 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.