Correlation Between Ceylon Cold and Pegasus Hotels

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

By analyzing existing cross correlation between Ceylon Cold Stores and Pegasus Hotels of, you can compare the effects of market volatilities on Ceylon Cold and Pegasus Hotels 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 Ceylon Cold with a short position of Pegasus Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceylon Cold and Pegasus Hotels.

Diversification Opportunities for Ceylon Cold and Pegasus Hotels

-0.11

Correlation Coefficient

Ceylon Cold  Pegasus Hotels

Good diversification

The 3 months correlation between Ceylon and Pegasus is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Cold Stores and Pegasus Hotels of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegasus Hotels and Ceylon Cold 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 Ceylon Cold Stores are associated (or correlated) with Pegasus Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegasus Hotels has no effect on the direction of Ceylon Cold i.e., Ceylon Cold and Pegasus Hotels go up and down completely randomly.

Pair Corralation between Ceylon Cold and Pegasus Hotels

Assuming the 90 days trading horizon Ceylon Cold Stores is expected to generate 0.88 times more return on investment than Pegasus Hotels. However, Ceylon Cold Stores is 1.13 times less risky than Pegasus Hotels. It trades about 0.19 of its potential returns per unit of risk. Pegasus Hotels of is currently generating about -0.07 per unit of risk. If you would invest  6,600  in Ceylon Cold Stores on December 4, 2024 and sell it today you would earn a total of  1,690  from holding Ceylon Cold Stores or generate 25.61% return on investment over 90 days.

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

Ceylon Cold Stores  vs.  Pegasus Hotels of

Ceylon Cold Stores

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Cold Stores are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Cold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pegasus Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pegasus Hotels of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ceylon Cold and Pegasus Hotels

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

The idea behind Ceylon Cold Stores and Pegasus Hotels of 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.