Correlation Between Thirumalai Chemicals and Elin Electronics

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

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

Diversification Opportunities for Thirumalai Chemicals and Elin Electronics

0.36

Correlation Coefficient

Thirumalai Chemicals  Elin Electronics

Weak diversification

The 3 months correlation between Thirumalai and Elin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Thirumalai Chemicals Limited and Elin Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elin Electronics and Thirumalai 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 Thirumalai Chemicals Limited are associated (or correlated) with Elin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elin Electronics has no effect on the direction of Thirumalai Chemicals i.e., Thirumalai Chemicals and Elin Electronics go up and down completely randomly.

Pair Corralation between Thirumalai Chemicals and Elin Electronics

Assuming the 90 days trading horizon Thirumalai Chemicals Limited is expected to under-perform the Elin Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Thirumalai Chemicals Limited is 1.17 times less risky than Elin Electronics. The stock trades about -0.3 of its potential returns per unit of risk. The Elin Electronics Limited is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  22,374  in Elin Electronics Limited on October 11, 2024 and sell it today you would lose (2,608) from holding Elin Electronics Limited or give up 11.66% of portfolio value over 90 days.

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

Thirumalai Chemicals Limited  vs.  Elin Electronics Limited

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.

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Thirumalai Chemicals and Elin Electronics

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

The idea behind Thirumalai Chemicals Limited and Elin Electronics 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 Global Correlations module to find global opportunities by holding instruments from different markets.