Correlation Between Thirumalai Chemicals and Nestle India

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

Diversification Opportunities for Thirumalai Chemicals and Nestle India

-0.18

Correlation Coefficient

Thirumalai Chemicals  Nestle India

Good diversification

The 3 months correlation between Thirumalai and Nestle is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Thirumalai Chemicals Limited and Nestle India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle India Limited 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 Nestle India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle India Limited has no effect on the direction of Thirumalai Chemicals i.e., Thirumalai Chemicals and Nestle India go up and down completely randomly.

Pair Corralation between Thirumalai Chemicals and Nestle India

Assuming the 90 days trading horizon Thirumalai Chemicals Limited is expected to under-perform the Nestle India. In addition to that, Thirumalai Chemicals is 2.63 times more volatile than Nestle India Limited. It trades about -0.11 of its total potential returns per unit of risk. Nestle India Limited is currently generating about 0.07 per unit of volatility. If you would invest  214,430  in Nestle India Limited on December 30, 2024 and sell it today you would earn a total of  10,645  from holding Nestle India Limited or generate 4.96% return on investment over 90 days.

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

Thirumalai Chemicals Limited  vs.  Nestle India Limited

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 weak 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.

Nestle India Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nestle India Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Nestle India is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Thirumalai Chemicals and Nestle India

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

The idea behind Thirumalai Chemicals Limited and Nestle India 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.