Correlation Between Syrma SGS and Thirumalai Chemicals

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

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

Diversification Opportunities for Syrma SGS and Thirumalai Chemicals

0.61

Correlation Coefficient

Syrma SGS  Thirumalai Chemicals

Poor diversification

The 3 months correlation between Syrma and Thirumalai is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Syrma SGS Technology and Thirumalai Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thirumalai Chemicals and Syrma SGS 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 Syrma SGS Technology 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 Syrma SGS i.e., Syrma SGS and Thirumalai Chemicals go up and down completely randomly.

Pair Corralation between Syrma SGS and Thirumalai Chemicals

Assuming the 90 days trading horizon Syrma SGS is expected to generate 1.81 times less return on investment than Thirumalai Chemicals. In addition to that, Syrma SGS is 1.12 times more volatile than Thirumalai Chemicals Limited. It trades about 0.03 of its total potential returns per unit of risk. Thirumalai Chemicals Limited is currently generating about 0.07 per unit of volatility. If you would invest  18,992  in Thirumalai Chemicals Limited on October 4, 2024 and sell it today you would earn a total of  13,088  from holding Thirumalai Chemicals Limited or generate 68.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.45%
Values	Daily Returns

Syrma SGS Technology  vs.  Thirumalai Chemicals Limited

Syrma SGS Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Syrma SGS Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Syrma SGS displayed 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Syrma SGS and Thirumalai Chemicals

The main advantage of trading using opposite Syrma SGS and Thirumalai Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Syrma SGS 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 Syrma SGS Technology 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.