Correlation Between Thirumalai Chemicals and Indian Hotels

Can any of the company-specific risk be diversified away by investing in both Thirumalai Chemicals and Indian Hotels 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 Indian Hotels 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 The Indian Hotels, you can compare the effects of market volatilities on Thirumalai Chemicals and Indian Hotels 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 Indian Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thirumalai Chemicals and Indian Hotels.

Diversification Opportunities for Thirumalai Chemicals and Indian Hotels

0.55

Correlation Coefficient

Thirumalai Chemicals  Indian Hotels

Very weak diversification

The 3 months correlation between Thirumalai and Indian is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Thirumalai Chemicals Limited and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels 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 Indian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Hotels has no effect on the direction of Thirumalai Chemicals i.e., Thirumalai Chemicals and Indian Hotels go up and down completely randomly.

Pair Corralation between Thirumalai Chemicals and Indian Hotels

Assuming the 90 days trading horizon Thirumalai Chemicals is expected to generate 6.39 times less return on investment than Indian Hotels. In addition to that, Thirumalai Chemicals is 1.21 times more volatile than The Indian Hotels. It trades about 0.02 of its total potential returns per unit of risk. The Indian Hotels is currently generating about 0.12 per unit of volatility. If you would invest  66,700  in The Indian Hotels on October 24, 2024 and sell it today you would earn a total of  10,575  from holding The Indian Hotels or generate 15.85% return on investment over 90 days.

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

Thirumalai Chemicals Limited  vs.  The Indian Hotels

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

Indian Hotels

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thirumalai Chemicals and Indian Hotels

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

The idea behind Thirumalai Chemicals Limited and The Indian Hotels 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.