Correlation Between Hindcon Chemicals and Tilaknagar Industries

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

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

Diversification Opportunities for Hindcon Chemicals and Tilaknagar Industries

0.69

Correlation Coefficient

Hindcon Chemicals  Tilaknagar Industries

Poor diversification

The 3 months correlation between Hindcon and Tilaknagar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hindcon Chemicals Limited and Tilaknagar Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tilaknagar Industries and Hindcon Chemicals 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 Hindcon Chemicals Limited are associated (or correlated) with Tilaknagar Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tilaknagar Industries has no effect on the direction of Hindcon Chemicals i.e., Hindcon Chemicals and Tilaknagar Industries go up and down completely randomly.

Pair Corralation between Hindcon Chemicals and Tilaknagar Industries

Assuming the 90 days trading horizon Hindcon Chemicals Limited is expected to generate 0.54 times more return on investment than Tilaknagar Industries. However, Hindcon Chemicals Limited is 1.86 times less risky than Tilaknagar Industries. It trades about -0.3 of its potential returns per unit of risk. Tilaknagar Industries Limited is currently generating about -0.2 per unit of risk. If you would invest  5,243  in Hindcon Chemicals Limited on December 4, 2024 and sell it today you would lose (1,838) from holding Hindcon Chemicals Limited or give up 35.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Hindcon Chemicals Limited  vs.  Tilaknagar Industries Limited

Hindcon Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hindcon Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Tilaknagar Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tilaknagar Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hindcon Chemicals and Tilaknagar Industries

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

The idea behind Hindcon Chemicals Limited and Tilaknagar Industries 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.