Correlation Between JSW Steel and Thirumalai Chemicals

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

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

Diversification Opportunities for JSW Steel and Thirumalai Chemicals

0.13

Correlation Coefficient

JSW Steel  Thirumalai Chemicals

Average diversification

The 3 months correlation between JSW and Thirumalai is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Thirumalai Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thirumalai Chemicals and JSW Steel 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 JSW Steel Limited 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 JSW Steel i.e., JSW Steel and Thirumalai Chemicals go up and down completely randomly.

Pair Corralation between JSW Steel and Thirumalai Chemicals

Assuming the 90 days trading horizon JSW Steel Limited is expected to generate 0.56 times more return on investment than Thirumalai Chemicals. However, JSW Steel Limited is 1.78 times less risky than Thirumalai Chemicals. It trades about 0.06 of its potential returns per unit of risk. Thirumalai Chemicals Limited is currently generating about 0.03 per unit of risk. If you would invest  66,754  in JSW Steel Limited on December 2, 2024 and sell it today you would earn a total of  28,316  from holding JSW Steel Limited or generate 42.42% return on investment over 90 days.

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

JSW Steel Limited  vs.  Thirumalai Chemicals Limited

JSW Steel Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days JSW Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, JSW Steel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Thirumalai Chemicals

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with JSW Steel and Thirumalai Chemicals

The main advantage of trading using opposite JSW Steel and Thirumalai Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JSW Steel 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 JSW Steel Limited 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.

Check out your portfolio center.

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.