Correlation Between Ceylon Guardian and RENUKA FOODS

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

Diversification Opportunities for Ceylon Guardian and RENUKA FOODS

0.58

Correlation Coefficient

Ceylon Guardian  RENUKA FOODS

Very weak diversification

The 3 months correlation between Ceylon and RENUKA is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Guardian Investment and RENUKA FOODS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENUKA FOODS 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 RENUKA FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENUKA FOODS PLC has no effect on the direction of Ceylon Guardian i.e., Ceylon Guardian and RENUKA FOODS go up and down completely randomly.

Pair Corralation between Ceylon Guardian and RENUKA FOODS

Assuming the 90 days trading horizon Ceylon Guardian Investment is expected to generate 1.0 times more return on investment than RENUKA FOODS. However, Ceylon Guardian is 1.0 times more volatile than RENUKA FOODS PLC. It trades about 0.0 of its potential returns per unit of risk. RENUKA FOODS PLC is currently generating about -0.01 per unit of risk. If you would invest  15,625  in Ceylon Guardian Investment on December 26, 2024 and sell it today you would lose (450.00) from holding Ceylon Guardian Investment or give up 2.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.98%
Values	Daily Returns

Ceylon Guardian Investment  vs.  RENUKA FOODS 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.

RENUKA FOODS PLC

Risk-Adjusted Performance

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.

Pair Trading with Ceylon Guardian and RENUKA FOODS

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

The idea behind Ceylon Guardian Investment and RENUKA FOODS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.