Correlation Between Tamilnad Mercantile and Styrenix Performance

Can any of the company-specific risk be diversified away by investing in both Tamilnad Mercantile and Styrenix Performance 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 Tamilnad Mercantile and Styrenix Performance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tamilnad Mercantile Bank and Styrenix Performance Materials, you can compare the effects of market volatilities on Tamilnad Mercantile and Styrenix Performance 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 Tamilnad Mercantile with a short position of Styrenix Performance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tamilnad Mercantile and Styrenix Performance.

Diversification Opportunities for Tamilnad Mercantile and Styrenix Performance

0.46

Correlation Coefficient

Tamilnad Mercantile  Styrenix Performance

Very weak diversification

The 3 months correlation between Tamilnad and Styrenix is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Tamilnad Mercantile Bank and Styrenix Performance Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Styrenix Performance and Tamilnad Mercantile 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 Tamilnad Mercantile Bank are associated (or correlated) with Styrenix Performance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Styrenix Performance has no effect on the direction of Tamilnad Mercantile i.e., Tamilnad Mercantile and Styrenix Performance go up and down completely randomly.

Pair Corralation between Tamilnad Mercantile and Styrenix Performance

Assuming the 90 days trading horizon Tamilnad Mercantile is expected to generate 2.26 times less return on investment than Styrenix Performance. But when comparing it to its historical volatility, Tamilnad Mercantile Bank is 1.57 times less risky than Styrenix Performance. It trades about 0.09 of its potential returns per unit of risk. Styrenix Performance Materials is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  246,185  in Styrenix Performance Materials on September 12, 2024 and sell it today you would earn a total of  45,740  from holding Styrenix Performance Materials or generate 18.58% return on investment over 90 days.

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

Tamilnad Mercantile Bank  vs.  Styrenix Performance Materials

Tamilnad Mercantile Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tamilnad Mercantile Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Tamilnad Mercantile may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Styrenix Performance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Styrenix Performance Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Styrenix Performance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tamilnad Mercantile and Styrenix Performance

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

The idea behind Tamilnad Mercantile Bank and Styrenix Performance Materials 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.