Correlation Between Thirumalai Chemicals and Mangalore Chemicals

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

Diversification Opportunities for Thirumalai Chemicals and Mangalore Chemicals

0.8

Correlation Coefficient

Thirumalai Chemicals  Mangalore Chemicals

Very poor diversification

The 3 months correlation between Thirumalai and Mangalore is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Thirumalai Chemicals Limited and Mangalore Chemicals Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalore Chemicals 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 Mangalore Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalore Chemicals has no effect on the direction of Thirumalai Chemicals i.e., Thirumalai Chemicals and Mangalore Chemicals go up and down completely randomly.

Pair Corralation between Thirumalai Chemicals and Mangalore Chemicals

Assuming the 90 days trading horizon Thirumalai Chemicals is expected to generate 3.36 times less return on investment than Mangalore Chemicals. In addition to that, Thirumalai Chemicals is 1.05 times more volatile than Mangalore Chemicals Fertilizers. It trades about 0.02 of its total potential returns per unit of risk. Mangalore Chemicals Fertilizers is currently generating about 0.09 per unit of volatility. If you would invest  12,644  in Mangalore Chemicals Fertilizers on September 30, 2024 and sell it today you would earn a total of  3,083  from holding Mangalore Chemicals Fertilizers or generate 24.38% return on investment over 90 days.

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

Thirumalai Chemicals Limited  vs.  Mangalore Chemicals Fertilizer

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

Mangalore Chemicals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thirumalai Chemicals and Mangalore Chemicals

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

The idea behind Thirumalai Chemicals Limited and Mangalore Chemicals Fertilizers 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.