Correlation Between Ceylon Tobacco and Asiri Surgical

Can any of the company-specific risk be diversified away by investing in both Ceylon Tobacco and Asiri Surgical 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 Tobacco and Asiri Surgical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ceylon Tobacco and Asiri Surgical Hospital, you can compare the effects of market volatilities on Ceylon Tobacco and Asiri Surgical 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 Tobacco with a short position of Asiri Surgical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceylon Tobacco and Asiri Surgical.

Diversification Opportunities for Ceylon Tobacco and Asiri Surgical

-0.55

Correlation Coefficient

Ceylon Tobacco  Asiri Surgical

Excellent diversification

The 3 months correlation between Ceylon and Asiri is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Tobacco and Asiri Surgical Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiri Surgical Hospital and Ceylon Tobacco 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 Tobacco are associated (or correlated) with Asiri Surgical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiri Surgical Hospital has no effect on the direction of Ceylon Tobacco i.e., Ceylon Tobacco and Asiri Surgical go up and down completely randomly.

Pair Corralation between Ceylon Tobacco and Asiri Surgical

Assuming the 90 days trading horizon Ceylon Tobacco is expected to generate 0.58 times more return on investment than Asiri Surgical. However, Ceylon Tobacco is 1.72 times less risky than Asiri Surgical. It trades about 0.19 of its potential returns per unit of risk. Asiri Surgical Hospital is currently generating about -0.08 per unit of risk. If you would invest  127,075  in Ceylon Tobacco on September 20, 2024 and sell it today you would earn a total of  4,525  from holding Ceylon Tobacco or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Ceylon Tobacco  vs.  Asiri Surgical Hospital

Ceylon Tobacco

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Tobacco are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Tobacco may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Asiri Surgical Hospital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ceylon Tobacco and Asiri Surgical

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

The idea behind Ceylon Tobacco and Asiri Surgical Hospital 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.