Correlation Between Ceylon Hospitals and Distilleries Company

Can any of the company-specific risk be diversified away by investing in both Ceylon Hospitals and Distilleries Company 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 Distilleries Company 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 Distilleries Company of, you can compare the effects of market volatilities on Ceylon Hospitals and Distilleries Company 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 Distilleries Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceylon Hospitals and Distilleries Company.

Diversification Opportunities for Ceylon Hospitals and Distilleries Company

-0.1

Correlation Coefficient

Ceylon Hospitals  Distilleries Company

Good diversification

The 3 months correlation between Ceylon and Distilleries is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Hospitals PLC and Distilleries Company of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distilleries Company 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 Distilleries Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distilleries Company has no effect on the direction of Ceylon Hospitals i.e., Ceylon Hospitals and Distilleries Company go up and down completely randomly.

Pair Corralation between Ceylon Hospitals and Distilleries Company

Assuming the 90 days trading horizon Ceylon Hospitals is expected to generate 51.55 times less return on investment than Distilleries Company. In addition to that, Ceylon Hospitals is 1.2 times more volatile than Distilleries Company of. It trades about 0.01 of its total potential returns per unit of risk. Distilleries Company of is currently generating about 0.35 per unit of volatility. If you would invest  2,750  in Distilleries Company of on October 10, 2024 and sell it today you would earn a total of  1,150  from holding Distilleries Company of or generate 41.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.36%
Values	Daily Returns

Ceylon Hospitals PLC  vs.  Distilleries Company of

Ceylon Hospitals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Distilleries Company

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Distilleries Company of are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Distilleries Company sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ceylon Hospitals and Distilleries Company

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

The idea behind Ceylon Hospitals PLC and Distilleries Company 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.