Correlation Between Ceylon Hospitals and E M

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

Diversification Opportunities for Ceylon Hospitals and E M

-0.35

Correlation Coefficient

Ceylon Hospitals  E M

Very good diversification

The 3 months correlation between Ceylon and EMLN0000 is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Hospitals PLC and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L 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 E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of Ceylon Hospitals i.e., Ceylon Hospitals and E M go up and down completely randomly.

Pair Corralation between Ceylon Hospitals and E M

Assuming the 90 days trading horizon Ceylon Hospitals PLC is expected to generate 0.85 times more return on investment than E M. However, Ceylon Hospitals PLC is 1.17 times less risky than E M. It trades about 0.1 of its potential returns per unit of risk. E M L is currently generating about -0.06 per unit of risk. If you would invest  11,200  in Ceylon Hospitals PLC on December 28, 2024 and sell it today you would earn a total of  1,550  from holding Ceylon Hospitals PLC or generate 13.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Ceylon Hospitals PLC  vs.  E M L

Ceylon Hospitals PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Hospitals PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Hospitals sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

Very Weak

Over the last 90 days E M L 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 Hospitals and E M

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

The idea behind Ceylon Hospitals PLC and E M L 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.