Correlation Between HATTON NATIONAL and Tal Lanka

Can any of the company-specific risk be diversified away by investing in both HATTON NATIONAL and Tal Lanka 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 Tal Lanka 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 Tal Lanka Hotels, you can compare the effects of market volatilities on HATTON NATIONAL and Tal Lanka 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 Tal Lanka. Check out your portfolio center. Please also check ongoing floating volatility patterns of HATTON NATIONAL and Tal Lanka.

Diversification Opportunities for HATTON NATIONAL and Tal Lanka

0.7

Correlation Coefficient

HATTON NATIONAL  Tal Lanka

Poor diversification

The 3 months correlation between HATTON and Tal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding HATTON NATIONAL BANK and Tal Lanka Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tal Lanka Hotels 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 Tal Lanka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tal Lanka Hotels has no effect on the direction of HATTON NATIONAL i.e., HATTON NATIONAL and Tal Lanka go up and down completely randomly.

Pair Corralation between HATTON NATIONAL and Tal Lanka

Assuming the 90 days trading horizon HATTON NATIONAL BANK is expected to generate 0.9 times more return on investment than Tal Lanka. However, HATTON NATIONAL BANK is 1.11 times less risky than Tal Lanka. It trades about 0.1 of its potential returns per unit of risk. Tal Lanka Hotels is currently generating about 0.01 per unit of risk. If you would invest  22,625  in HATTON NATIONAL BANK on December 24, 2024 and sell it today you would earn a total of  3,100  from holding HATTON NATIONAL BANK or generate 13.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

HATTON NATIONAL BANK  vs.  Tal Lanka Hotels

HATTON NATIONAL BANK

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HATTON NATIONAL BANK are ranked lower than 8 (%) 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.

Tal Lanka Hotels

Risk-Adjusted Performance

Very Weak

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

Pair Trading with HATTON NATIONAL and Tal Lanka

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

The idea behind HATTON NATIONAL BANK and Tal Lanka Hotels 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.