Correlation Between Thirumalai Chemicals and Oriental Carbon

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

Diversification Opportunities for Thirumalai Chemicals and Oriental Carbon

-0.19

Correlation Coefficient

Thirumalai Chemicals  Oriental Carbon

Good diversification

The 3 months correlation between Thirumalai and Oriental is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Thirumalai Chemicals Limited and Oriental Carbon Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Carbon 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 Oriental Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Carbon Chemicals has no effect on the direction of Thirumalai Chemicals i.e., Thirumalai Chemicals and Oriental Carbon go up and down completely randomly.

Pair Corralation between Thirumalai Chemicals and Oriental Carbon

Assuming the 90 days trading horizon Thirumalai Chemicals Limited is expected to generate 1.01 times more return on investment than Oriental Carbon. However, Thirumalai Chemicals is 1.01 times more volatile than Oriental Carbon Chemicals. It trades about 0.0 of its potential returns per unit of risk. Oriental Carbon Chemicals is currently generating about -0.03 per unit of risk. If you would invest  33,850  in Thirumalai Chemicals Limited on September 22, 2024 and sell it today you would lose (575.00) from holding Thirumalai Chemicals Limited or give up 1.7% of portfolio value over 90 days.

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

Thirumalai Chemicals Limited  vs.  Oriental Carbon Chemicals

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.

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Oriental Carbon is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Thirumalai Chemicals and Oriental Carbon

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

The idea behind Thirumalai Chemicals Limited and Oriental Carbon Chemicals 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.