Correlation Between Lanka Realty and Lanka Ceramic

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

By analyzing existing cross correlation between Lanka Realty Investments and Lanka Ceramic PLC, you can compare the effects of market volatilities on Lanka Realty and Lanka Ceramic 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 Lanka Realty with a short position of Lanka Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lanka Realty and Lanka Ceramic.

Diversification Opportunities for Lanka Realty and Lanka Ceramic

0.0

Correlation Coefficient

Lanka Realty  Lanka Ceramic

Pay attention - limited upside

The 3 months correlation between Lanka and Lanka is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lanka Realty Investments and Lanka Ceramic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanka Ceramic PLC and Lanka Realty 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 Lanka Realty Investments are associated (or correlated) with Lanka Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanka Ceramic PLC has no effect on the direction of Lanka Realty i.e., Lanka Realty and Lanka Ceramic go up and down completely randomly.

Pair Corralation between Lanka Realty and Lanka Ceramic

If you would invest  1,100  in Lanka Realty Investments on October 7, 2024 and sell it today you would earn a total of  300.00  from holding Lanka Realty Investments or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lanka Realty Investments  vs.  Lanka Ceramic PLC

Lanka Realty Investments

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lanka Realty Investments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lanka Realty sustained solid returns over the last few months and may actually be approaching a breakup point.

Lanka Ceramic PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lanka Realty and Lanka Ceramic

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

The idea behind Lanka Realty Investments and Lanka Ceramic PLC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.