Correlation Between Thomas Scott and Bhagiradha Chemicals

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

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

Diversification Opportunities for Thomas Scott and Bhagiradha Chemicals

-0.5

Correlation Coefficient

Thomas Scott  Bhagiradha Chemicals

Very good diversification

The 3 months correlation between Thomas and Bhagiradha is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Thomas Scott Limited and Bhagiradha Chemicals Industrie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bhagiradha Chemicals and Thomas Scott 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 Thomas Scott Limited are associated (or correlated) with Bhagiradha Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bhagiradha Chemicals has no effect on the direction of Thomas Scott i.e., Thomas Scott and Bhagiradha Chemicals go up and down completely randomly.

Pair Corralation between Thomas Scott and Bhagiradha Chemicals

Assuming the 90 days trading horizon Thomas Scott Limited is expected to generate 1.38 times more return on investment than Bhagiradha Chemicals. However, Thomas Scott is 1.38 times more volatile than Bhagiradha Chemicals Industries. It trades about 0.32 of its potential returns per unit of risk. Bhagiradha Chemicals Industries is currently generating about -0.07 per unit of risk. If you would invest  23,854  in Thomas Scott Limited on September 29, 2024 and sell it today you would earn a total of  24,179  from holding Thomas Scott Limited or generate 101.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Thomas Scott Limited  vs.  Bhagiradha Chemicals Industrie

Thomas Scott Limited

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bhagiradha Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bhagiradha Chemicals Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Thomas Scott and Bhagiradha Chemicals

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

The idea behind Thomas Scott Limited and Bhagiradha Chemicals Industries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.