Correlation Between Hisar Metal and Thirumalai Chemicals

Can any of the company-specific risk be diversified away by investing in both Hisar 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 Hisar 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 Hisar Metal Industries and Thirumalai Chemicals Limited, you can compare the effects of market volatilities on Hisar 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 Hisar Metal with a short position of Thirumalai Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hisar Metal and Thirumalai Chemicals.

Diversification Opportunities for Hisar Metal and Thirumalai Chemicals

0.1

Correlation Coefficient

Hisar Metal  Thirumalai Chemicals

Average diversification

The 3 months correlation between Hisar and Thirumalai is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and Thirumalai Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thirumalai Chemicals and Hisar 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 Hisar Metal Industries 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 Hisar Metal i.e., Hisar Metal and Thirumalai Chemicals go up and down completely randomly.

Pair Corralation between Hisar Metal and Thirumalai Chemicals

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 1.14 times more return on investment than Thirumalai Chemicals. However, Hisar Metal is 1.14 times more volatile than Thirumalai Chemicals Limited. It trades about 0.45 of its potential returns per unit of risk. Thirumalai Chemicals Limited is currently generating about 0.07 per unit of risk. If you would invest  16,361  in Hisar Metal Industries on September 24, 2024 and sell it today you would earn a total of  5,433  from holding Hisar Metal Industries or generate 33.21% return on investment over 90 days.

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

Hisar Metal Industries  vs.  Thirumalai Chemicals Limited

Hisar Metal Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hisar Metal is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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

Pair Trading with Hisar Metal and Thirumalai Chemicals

The main advantage of trading using opposite Hisar Metal and Thirumalai Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hisar 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 Hisar Metal Industries 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.