Correlation Between Hotel Sigiriya and Senkadagala Finance

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

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

Diversification Opportunities for Hotel Sigiriya and Senkadagala Finance

0.23

Correlation Coefficient

Hotel Sigiriya  Senkadagala Finance

Modest diversification

The 3 months correlation between Hotel and Senkadagala is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Sigiriya PLC and Senkadagala Finance PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senkadagala Finance PLC and Hotel Sigiriya 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 Hotel Sigiriya PLC are associated (or correlated) with Senkadagala Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senkadagala Finance PLC has no effect on the direction of Hotel Sigiriya i.e., Hotel Sigiriya and Senkadagala Finance go up and down completely randomly.

Pair Corralation between Hotel Sigiriya and Senkadagala Finance

Assuming the 90 days trading horizon Hotel Sigiriya is expected to generate 1.8 times less return on investment than Senkadagala Finance. But when comparing it to its historical volatility, Hotel Sigiriya PLC is 1.32 times less risky than Senkadagala Finance. It trades about 0.01 of its potential returns per unit of risk. Senkadagala Finance PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  41,600  in Senkadagala Finance PLC on December 28, 2024 and sell it today you would lose (575.00) from holding Senkadagala Finance PLC or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	73.68%
Values	Daily Returns

Hotel Sigiriya PLC  vs.  Senkadagala Finance PLC

Hotel Sigiriya PLC

Risk-Adjusted Performance

Very Weak

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

Senkadagala Finance PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Senkadagala Finance PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Senkadagala Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hotel Sigiriya and Senkadagala Finance

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

The idea behind Hotel Sigiriya PLC and Senkadagala Finance 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 Global Correlations module to find global opportunities by holding instruments from different markets.