Correlation Between HNB Finance and Hotel Sigiriya

Can any of the company-specific risk be diversified away by investing in both HNB Finance and Hotel Sigiriya 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 HNB Finance and Hotel Sigiriya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HNB Finance and Hotel Sigiriya PLC, you can compare the effects of market volatilities on HNB Finance and Hotel Sigiriya 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 HNB Finance with a short position of Hotel Sigiriya. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNB Finance and Hotel Sigiriya.

Diversification Opportunities for HNB Finance and Hotel Sigiriya

-0.77

Correlation Coefficient

HNB Finance  Hotel Sigiriya

Pay attention - limited upside

The 3 months correlation between HNB and Hotel is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding HNB Finance and Hotel Sigiriya PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Sigiriya PLC and HNB Finance 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 HNB Finance are associated (or correlated) with Hotel Sigiriya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Sigiriya PLC has no effect on the direction of HNB Finance i.e., HNB Finance and Hotel Sigiriya go up and down completely randomly.

Pair Corralation between HNB Finance and Hotel Sigiriya

Assuming the 90 days trading horizon HNB Finance is expected to generate 3.39 times less return on investment than Hotel Sigiriya. In addition to that, HNB Finance is 1.17 times more volatile than Hotel Sigiriya PLC. It trades about 0.02 of its total potential returns per unit of risk. Hotel Sigiriya PLC is currently generating about 0.09 per unit of volatility. If you would invest  3,040  in Hotel Sigiriya PLC on October 4, 2024 and sell it today you would earn a total of  5,110  from holding Hotel Sigiriya PLC or generate 168.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.36%
Values	Daily Returns

HNB Finance  vs.  Hotel Sigiriya PLC

HNB Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNB Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hotel Sigiriya PLC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Sigiriya PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hotel Sigiriya sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HNB Finance and Hotel Sigiriya

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

The idea behind HNB Finance and Hotel Sigiriya 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.