Correlation Between Ceylon Graphite and Macmahon Holdings

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

By analyzing existing cross correlation between Ceylon Graphite Corp and Macmahon Holdings Limited, you can compare the effects of market volatilities on Ceylon Graphite and Macmahon Holdings 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 Graphite with a short position of Macmahon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceylon Graphite and Macmahon Holdings.

Diversification Opportunities for Ceylon Graphite and Macmahon Holdings

-0.47

Correlation Coefficient

Ceylon Graphite  Macmahon Holdings

Very good diversification

The 3 months correlation between Ceylon and Macmahon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Graphite Corp and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon Holdings and Ceylon Graphite 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 Graphite Corp are associated (or correlated) with Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of Ceylon Graphite i.e., Ceylon Graphite and Macmahon Holdings go up and down completely randomly.

Pair Corralation between Ceylon Graphite and Macmahon Holdings

Assuming the 90 days horizon Ceylon Graphite Corp is expected to generate 33.47 times more return on investment than Macmahon Holdings. However, Ceylon Graphite is 33.47 times more volatile than Macmahon Holdings Limited. It trades about 0.19 of its potential returns per unit of risk. Macmahon Holdings Limited is currently generating about -0.13 per unit of risk. If you would invest  1.11  in Ceylon Graphite Corp on December 30, 2024 and sell it today you would earn a total of  1.29  from holding Ceylon Graphite Corp or generate 116.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Ceylon Graphite Corp  vs.  Macmahon Holdings Limited

Ceylon Graphite Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Graphite Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ceylon Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Macmahon Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macmahon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ceylon Graphite and Macmahon Holdings

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

The idea behind Ceylon Graphite Corp and Macmahon Holdings Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.