Correlation Between Colombo Investment and Hatton National

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Can any of the company-specific risk be diversified away by investing in both Colombo Investment and Hatton National 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 Colombo Investment and Hatton National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colombo Investment Trust and Hatton National Bank, you can compare the effects of market volatilities on Colombo Investment and Hatton National 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 Colombo Investment with a short position of Hatton National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colombo Investment and Hatton National.

Diversification Opportunities for Colombo Investment and Hatton National

ColomboHattonDiversified AwayColomboHattonDiversified Away100%
-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Colombo and Hatton is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Colombo Investment Trust and Hatton National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hatton National Bank and Colombo Investment 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 Colombo Investment Trust are associated (or correlated) with Hatton National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hatton National Bank has no effect on the direction of Colombo Investment i.e., Colombo Investment and Hatton National go up and down completely randomly.

Pair Corralation between Colombo Investment and Hatton National

Assuming the 90 days trading horizon Colombo Investment is expected to generate 1.22 times less return on investment than Hatton National. In addition to that, Colombo Investment is 2.45 times more volatile than Hatton National Bank. It trades about 0.14 of its total potential returns per unit of risk. Hatton National Bank is currently generating about 0.41 per unit of volatility. If you would invest  16,400  in Hatton National Bank on September 15, 2024 and sell it today you would earn a total of  8,500  from holding Hatton National Bank or generate 51.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy56.67%
ValuesDaily Returns

Colombo Investment Trust  vs.  Hatton National Bank

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 010203040
JavaScript chart by amCharts 3.21.15CITN0000 HNBN0000
       Timeline  
Colombo Investment Trust 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Colombo Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Colombo Investment sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15MayJunJulSepOctNovDecJunJulSepOctNovDec9095100105110115
Hatton National Bank 

Risk-Adjusted Performance

32 of 100

 
Weak
 
Strong
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Hatton National Bank are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hatton National sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec160180200220240

Colombo Investment and Hatton National Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-13.04-9.77-6.49-3.220.03.196.549.8913.2516.6 0.020.040.060.080.100.12
JavaScript chart by amCharts 3.21.15CITN0000 HNBN0000
       Returns  

Pair Trading with Colombo Investment and Hatton National

The main advantage of trading using opposite Colombo Investment and Hatton National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colombo Investment position performs unexpectedly, Hatton National 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 Hatton National will offset losses from the drop in Hatton National's long position.
The idea behind Colombo Investment Trust and Hatton National Bank 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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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