Correlation Between HATTON NATIONAL and Ceylon Cold

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Can any of the company-specific risk be diversified away by investing in both HATTON NATIONAL and Ceylon Cold 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 HATTON NATIONAL and Ceylon Cold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HATTON NATIONAL BANK and Ceylon Cold Stores, you can compare the effects of market volatilities on HATTON NATIONAL and Ceylon Cold 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 HATTON NATIONAL with a short position of Ceylon Cold. Check out your portfolio center. Please also check ongoing floating volatility patterns of HATTON NATIONAL and Ceylon Cold.

Diversification Opportunities for HATTON NATIONAL and Ceylon Cold

HATTONCeylonDiversified AwayHATTONCeylonDiversified Away100%
0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between HATTON and Ceylon is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding HATTON NATIONAL BANK and Ceylon Cold Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Cold Stores and HATTON NATIONAL 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 HATTON NATIONAL BANK are associated (or correlated) with Ceylon Cold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Cold Stores has no effect on the direction of HATTON NATIONAL i.e., HATTON NATIONAL and Ceylon Cold go up and down completely randomly.

Pair Corralation between HATTON NATIONAL and Ceylon Cold

Assuming the 90 days trading horizon HATTON NATIONAL BANK is expected to generate 0.98 times more return on investment than Ceylon Cold. However, HATTON NATIONAL BANK is 1.02 times less risky than Ceylon Cold. It trades about 0.37 of its potential returns per unit of risk. Ceylon Cold Stores is currently generating about 0.34 per unit of risk. If you would invest  17,700  in HATTON NATIONAL BANK on October 6, 2024 and sell it today you would earn a total of  8,475  from holding HATTON NATIONAL BANK or generate 47.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

HATTON NATIONAL BANK  vs.  Ceylon Cold Stores

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -30-25-20-15-10-5
JavaScript chart by amCharts 3.21.15HNBX0000 CCSN0000
       Timeline  
HATTON NATIONAL BANK 

Risk-Adjusted Performance

28 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in HATTON NATIONAL BANK are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HATTON NATIONAL sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan180200220240260
Ceylon Cold Stores 

Risk-Adjusted Performance

27 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Cold Stores are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Cold sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan606570758085

HATTON NATIONAL and Ceylon Cold Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.32-3.98-2.65-1.310.02671.63.214.816.41 0.020.040.060.080.100.12
JavaScript chart by amCharts 3.21.15HNBX0000 CCSN0000
       Returns  

Pair Trading with HATTON NATIONAL and Ceylon Cold

The main advantage of trading using opposite HATTON NATIONAL and Ceylon Cold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HATTON NATIONAL position performs unexpectedly, Ceylon Cold 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 Ceylon Cold will offset losses from the drop in Ceylon Cold's long position.
The idea behind HATTON NATIONAL BANK and Ceylon Cold Stores 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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