Correlation Between RENUKA FOODS and Hotel Sigiriya

Can any of the company-specific risk be diversified away by investing in both RENUKA FOODS and Hotel Sigiriya 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 RENUKA FOODS and Hotel Sigiriya into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for RENUKA FOODS and Hotel Sigiriya

0.71

Correlation Coefficient

RENUKA FOODS  Hotel Sigiriya

Poor diversification

The 3 months correlation between RENUKA and Hotel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding RENUKA FOODS PLC and Hotel Sigiriya PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Sigiriya PLC and RENUKA FOODS 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 RENUKA FOODS PLC are associated (or correlated) with Hotel Sigiriya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Sigiriya PLC has no effect on the direction of RENUKA FOODS i.e., RENUKA FOODS and Hotel Sigiriya go up and down completely randomly.

Pair Corralation between RENUKA FOODS and Hotel Sigiriya

Assuming the 90 days trading horizon RENUKA FOODS is expected to generate 3.74 times less return on investment than Hotel Sigiriya. But when comparing it to its historical volatility, RENUKA FOODS PLC is 1.02 times less risky than Hotel Sigiriya. It trades about 0.02 of its potential returns per unit of risk. Hotel Sigiriya PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,870  in Hotel Sigiriya PLC on December 5, 2024 and sell it today you would earn a total of  510.00  from holding Hotel Sigiriya PLC or generate 7.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

RENUKA FOODS PLC  vs.  Hotel Sigiriya PLC

RENUKA FOODS PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RENUKA FOODS PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, RENUKA FOODS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hotel Sigiriya PLC

Risk-Adjusted Performance

Insignificant

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

Pair Trading with RENUKA FOODS and Hotel Sigiriya

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

The idea behind RENUKA FOODS PLC and Hotel Sigiriya 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.