Correlation Between Ceylon Hospitals and Singhe Hospitals

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

Diversification Opportunities for Ceylon Hospitals and Singhe Hospitals

0.26

Correlation Coefficient

Ceylon Hospitals  Singhe Hospitals

Modest diversification

The 3 months correlation between Ceylon and Singhe is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Hospitals PLC and Singhe Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singhe Hospitals 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 Singhe Hospitals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singhe Hospitals has no effect on the direction of Ceylon Hospitals i.e., Ceylon Hospitals and Singhe Hospitals go up and down completely randomly.

Pair Corralation between Ceylon Hospitals and Singhe Hospitals

Assuming the 90 days trading horizon Ceylon Hospitals is expected to generate 1.77 times less return on investment than Singhe Hospitals. But when comparing it to its historical volatility, Ceylon Hospitals PLC is 1.89 times less risky than Singhe Hospitals. It trades about 0.13 of its potential returns per unit of risk. Singhe Hospitals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  240.00  in Singhe Hospitals on October 23, 2024 and sell it today you would earn a total of  20.00  from holding Singhe Hospitals or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ceylon Hospitals PLC  vs.  Singhe Hospitals

Ceylon Hospitals PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Hospitals PLC are ranked lower than 5 (%) 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.

Singhe Hospitals

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Ceylon Hospitals and Singhe Hospitals

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

The idea behind Ceylon Hospitals PLC and Singhe Hospitals 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.