Correlation Between Ceylon Hospitals and Colombo Investment

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

By analyzing existing cross correlation between Ceylon Hospitals PLC and Colombo Investment Trust, you can compare the effects of market volatilities on Ceylon Hospitals and Colombo Investment 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 Hospitals with a short position of Colombo Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceylon Hospitals and Colombo Investment.

Diversification Opportunities for Ceylon Hospitals and Colombo Investment

0.31

Correlation Coefficient

Ceylon Hospitals  Colombo Investment

Weak diversification

The 3 months correlation between Ceylon and Colombo is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Hospitals PLC and Colombo Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colombo Investment Trust and Ceylon Hospitals 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 Hospitals PLC are associated (or correlated) with Colombo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colombo Investment Trust has no effect on the direction of Ceylon Hospitals i.e., Ceylon Hospitals and Colombo Investment go up and down completely randomly.

Pair Corralation between Ceylon Hospitals and Colombo Investment

Assuming the 90 days trading horizon Ceylon Hospitals PLC is expected to generate 0.71 times more return on investment than Colombo Investment. However, Ceylon Hospitals PLC is 1.41 times less risky than Colombo Investment. It trades about 0.06 of its potential returns per unit of risk. Colombo Investment Trust is currently generating about 0.02 per unit of risk. If you would invest  11,700  in Ceylon Hospitals PLC on October 20, 2024 and sell it today you would earn a total of  575.00  from holding Ceylon Hospitals PLC or generate 4.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.62%
Values	Daily Returns

Ceylon Hospitals PLC  vs.  Colombo Investment Trust

Ceylon Hospitals PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Hospitals PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Hospitals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Colombo Investment Trust

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Colombo Investment Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Colombo Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ceylon Hospitals and Colombo Investment

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

The idea behind Ceylon Hospitals PLC and Colombo Investment Trust 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.