Correlation Between Galadari Hotels and E M

Can any of the company-specific risk be diversified away by investing in both Galadari Hotels and E M 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 Galadari Hotels and E M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Galadari Hotels Lanka and E M L, you can compare the effects of market volatilities on Galadari Hotels and E M 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 Galadari Hotels with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galadari Hotels and E M.

Diversification Opportunities for Galadari Hotels and E M

0.61

Correlation Coefficient

Galadari Hotels  E M

Poor diversification

The 3 months correlation between Galadari and EMLN0000 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Galadari Hotels Lanka and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and Galadari Hotels 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 Galadari Hotels Lanka are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of Galadari Hotels i.e., Galadari Hotels and E M go up and down completely randomly.

Pair Corralation between Galadari Hotels and E M

Assuming the 90 days trading horizon Galadari Hotels Lanka is expected to generate 0.53 times more return on investment than E M. However, Galadari Hotels Lanka is 1.9 times less risky than E M. It trades about 0.1 of its potential returns per unit of risk. E M L is currently generating about 0.04 per unit of risk. If you would invest  1,530  in Galadari Hotels Lanka on September 24, 2024 and sell it today you would earn a total of  190.00  from holding Galadari Hotels Lanka or generate 12.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Galadari Hotels Lanka  vs.  E M L

Galadari Hotels Lanka

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Galadari Hotels Lanka are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Galadari Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Galadari Hotels and E M

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

The idea behind Galadari Hotels Lanka and E M L 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.