Correlation Between Aitken Spence and Sri Lanka

Can any of the company-specific risk be diversified away by investing in both Aitken Spence and Sri Lanka 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 Aitken Spence and Sri Lanka into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aitken Spence Hotel and Sri Lanka Telecom, you can compare the effects of market volatilities on Aitken Spence and Sri Lanka 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 Aitken Spence with a short position of Sri Lanka. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aitken Spence and Sri Lanka.

Diversification Opportunities for Aitken Spence and Sri Lanka

0.24

Correlation Coefficient

Aitken Spence  Sri Lanka

Modest diversification

The 3 months correlation between Aitken and Sri is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aitken Spence Hotel and Sri Lanka Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sri Lanka Telecom and Aitken Spence 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 Aitken Spence Hotel are associated (or correlated) with Sri Lanka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sri Lanka Telecom has no effect on the direction of Aitken Spence i.e., Aitken Spence and Sri Lanka go up and down completely randomly.

Pair Corralation between Aitken Spence and Sri Lanka

Assuming the 90 days trading horizon Aitken Spence Hotel is expected to generate 1.26 times more return on investment than Sri Lanka. However, Aitken Spence is 1.26 times more volatile than Sri Lanka Telecom. It trades about -0.03 of its potential returns per unit of risk. Sri Lanka Telecom is currently generating about -0.18 per unit of risk. If you would invest  8,490  in Aitken Spence Hotel on December 25, 2024 and sell it today you would lose (370.00) from holding Aitken Spence Hotel or give up 4.36% of portfolio value over 90 days.

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

Aitken Spence Hotel  vs.  Sri Lanka Telecom

Aitken Spence Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aitken Spence Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aitken Spence is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sri Lanka Telecom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sri Lanka Telecom 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 basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aitken Spence and Sri Lanka

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

The idea behind Aitken Spence Hotel and Sri Lanka Telecom 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.