Correlation Between HNB Finance and VIDULLANKA PLC

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

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

Diversification Opportunities for HNB Finance and VIDULLANKA PLC

0.28

Correlation Coefficient

HNB Finance  VIDULLANKA PLC

Modest diversification

The 3 months correlation between HNB and VIDULLANKA is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding HNB Finance and VIDULLANKA PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIDULLANKA 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 VIDULLANKA PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIDULLANKA PLC has no effect on the direction of HNB Finance i.e., HNB Finance and VIDULLANKA PLC go up and down completely randomly.

Pair Corralation between HNB Finance and VIDULLANKA PLC

Assuming the 90 days trading horizon HNB Finance is expected to under-perform the VIDULLANKA PLC. In addition to that, HNB Finance is 8.21 times more volatile than VIDULLANKA PLC. It trades about -0.08 of its total potential returns per unit of risk. VIDULLANKA PLC is currently generating about -0.06 per unit of volatility. If you would invest  920.00  in VIDULLANKA PLC on September 28, 2024 and sell it today you would lose (10.00) from holding VIDULLANKA PLC or give up 1.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

HNB Finance  vs.  VIDULLANKA 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

VIDULLANKA PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VIDULLANKA PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, VIDULLANKA PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HNB Finance and VIDULLANKA PLC

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

The idea behind HNB Finance and VIDULLANKA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.