Correlation Between Ceylinco Insurance and Madulsima Plantations

Can any of the company-specific risk be diversified away by investing in both Ceylinco Insurance and Madulsima Plantations 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 Ceylinco Insurance and Madulsima Plantations into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ceylinco Insurance PLC and Madulsima Plantations PLC, you can compare the effects of market volatilities on Ceylinco Insurance and Madulsima Plantations 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 Ceylinco Insurance with a short position of Madulsima Plantations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceylinco Insurance and Madulsima Plantations.

Diversification Opportunities for Ceylinco Insurance and Madulsima Plantations

-0.54

Correlation Coefficient

Ceylinco Insurance  Madulsima Plantations

Excellent diversification

The 3 months correlation between Ceylinco and Madulsima is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ceylinco Insurance PLC and Madulsima Plantations PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madulsima Plantations PLC and Ceylinco Insurance 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 Ceylinco Insurance PLC are associated (or correlated) with Madulsima Plantations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madulsima Plantations PLC has no effect on the direction of Ceylinco Insurance i.e., Ceylinco Insurance and Madulsima Plantations go up and down completely randomly.

Pair Corralation between Ceylinco Insurance and Madulsima Plantations

Assuming the 90 days trading horizon Ceylinco Insurance PLC is expected to generate 1.23 times more return on investment than Madulsima Plantations. However, Ceylinco Insurance is 1.23 times more volatile than Madulsima Plantations PLC. It trades about 0.03 of its potential returns per unit of risk. Madulsima Plantations PLC is currently generating about -0.07 per unit of risk. If you would invest  300,000  in Ceylinco Insurance PLC on December 28, 2024 and sell it today you would earn a total of  5,275  from holding Ceylinco Insurance PLC or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.47%
Values	Daily Returns

Ceylinco Insurance PLC  vs.  Madulsima Plantations PLC

Ceylinco Insurance PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylinco Insurance PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ceylinco Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Madulsima Plantations PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Madulsima Plantations PLC 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 Ceylinco Insurance and Madulsima Plantations

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

The idea behind Ceylinco Insurance PLC and Madulsima Plantations PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..