Correlation Between Ceylon Hospitals and Janashakthi Insurance

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

Diversification Opportunities for Ceylon Hospitals and Janashakthi Insurance

-0.38

Correlation Coefficient

Ceylon Hospitals  Janashakthi Insurance

Very good diversification

The 3 months correlation between Ceylon and Janashakthi is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Hospitals PLC and Janashakthi Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janashakthi Insurance 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 Janashakthi Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janashakthi Insurance has no effect on the direction of Ceylon Hospitals i.e., Ceylon Hospitals and Janashakthi Insurance go up and down completely randomly.

Pair Corralation between Ceylon Hospitals and Janashakthi Insurance

Assuming the 90 days trading horizon Ceylon Hospitals is expected to generate 5.24 times less return on investment than Janashakthi Insurance. In addition to that, Ceylon Hospitals is 1.34 times more volatile than Janashakthi Insurance. It trades about 0.03 of its total potential returns per unit of risk. Janashakthi Insurance is currently generating about 0.2 per unit of volatility. If you would invest  5,000  in Janashakthi Insurance on October 10, 2024 and sell it today you would earn a total of  400.00  from holding Janashakthi Insurance or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ceylon Hospitals PLC  vs.  Janashakthi Insurance

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.

Janashakthi Insurance

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Janashakthi Insurance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Janashakthi Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ceylon Hospitals and Janashakthi Insurance

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

The idea behind Ceylon Hospitals PLC and Janashakthi Insurance 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.