Correlation Between RENUKA FOODS and Sri Lanka

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

Diversification Opportunities for RENUKA FOODS and Sri Lanka

0.48

Correlation Coefficient

RENUKA FOODS  Sri Lanka

Very weak diversification

The 3 months correlation between RENUKA and Sri is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding RENUKA FOODS PLC and Sri Lanka Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sri Lanka Telecom 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 Sri Lanka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sri Lanka Telecom has no effect on the direction of RENUKA FOODS i.e., RENUKA FOODS and Sri Lanka go up and down completely randomly.

Pair Corralation between RENUKA FOODS and Sri Lanka

Assuming the 90 days trading horizon RENUKA FOODS PLC is expected to generate 1.29 times more return on investment than Sri Lanka. However, RENUKA FOODS is 1.29 times more volatile than Sri Lanka Telecom. It trades about 0.1 of its potential returns per unit of risk. Sri Lanka Telecom is currently generating about 0.03 per unit of risk. If you would invest  990.00  in RENUKA FOODS PLC on October 26, 2024 and sell it today you would earn a total of  90.00  from holding RENUKA FOODS PLC or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

RENUKA FOODS PLC  vs.  Sri Lanka Telecom

RENUKA FOODS PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RENUKA FOODS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Sri Lanka Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sri Lanka Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sri Lanka is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RENUKA FOODS and Sri Lanka

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

The idea behind RENUKA FOODS PLC and Sri Lanka Telecom 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.