Correlation Between Ceylon Guardian and Ceylinco Insurance

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

By analyzing existing cross correlation between Ceylon Guardian Investment and Ceylinco Insurance PLC, you can compare the effects of market volatilities on Ceylon Guardian and Ceylinco Insurance 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 Guardian with a short position of Ceylinco Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceylon Guardian and Ceylinco Insurance.

Diversification Opportunities for Ceylon Guardian and Ceylinco Insurance

0.2

Correlation Coefficient

Ceylon Guardian  Ceylinco Insurance

Modest diversification

The 3 months correlation between Ceylon and Ceylinco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Guardian Investment and Ceylinco Insurance PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylinco Insurance PLC and Ceylon Guardian 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 Guardian Investment are associated (or correlated) with Ceylinco Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylinco Insurance PLC has no effect on the direction of Ceylon Guardian i.e., Ceylon Guardian and Ceylinco Insurance go up and down completely randomly.

Pair Corralation between Ceylon Guardian and Ceylinco Insurance

Assuming the 90 days trading horizon Ceylon Guardian Investment is expected to under-perform the Ceylinco Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Ceylon Guardian Investment is 1.08 times less risky than Ceylinco Insurance. The stock trades about -0.01 of its potential returns per unit of risk. The Ceylinco Insurance PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  300,000  in Ceylinco Insurance PLC on December 29, 2024 and sell it today you would earn a total of  5,275  from holding Ceylinco Insurance PLC or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.66%
Values	Daily Returns

Ceylon Guardian Investment  vs.  Ceylinco Insurance PLC

Ceylon Guardian Inve

Risk-Adjusted Performance

Very Weak

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

Ceylinco Insurance PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylinco Insurance PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ceylinco Insurance 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 Guardian and Ceylinco Insurance

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

The idea behind Ceylon Guardian Investment and Ceylinco Insurance 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.