Correlation Between Janashakthi Insurance and Serendib Hotels

Can any of the company-specific risk be diversified away by investing in both Janashakthi Insurance and Serendib Hotels 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 Janashakthi Insurance and Serendib Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Janashakthi Insurance and Serendib Hotels

0.01

Correlation Coefficient

Janashakthi Insurance  Serendib Hotels

Significant diversification

The 3 months correlation between Janashakthi and Serendib is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Janashakthi Insurance and Serendib Hotels PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Serendib Hotels PLC and Janashakthi Insurance 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 Janashakthi Insurance are associated (or correlated) with Serendib Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Serendib Hotels PLC has no effect on the direction of Janashakthi Insurance i.e., Janashakthi Insurance and Serendib Hotels go up and down completely randomly.

Pair Corralation between Janashakthi Insurance and Serendib Hotels

Assuming the 90 days trading horizon Janashakthi Insurance is expected to generate 0.81 times more return on investment than Serendib Hotels. However, Janashakthi Insurance is 1.24 times less risky than Serendib Hotels. It trades about 0.07 of its potential returns per unit of risk. Serendib Hotels PLC is currently generating about -0.21 per unit of risk. If you would invest  6,410  in Janashakthi Insurance on December 5, 2024 and sell it today you would earn a total of  190.00  from holding Janashakthi Insurance or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Janashakthi Insurance  vs.  Serendib Hotels PLC

Janashakthi Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Janashakthi Insurance are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Janashakthi Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Serendib Hotels PLC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Janashakthi Insurance and Serendib Hotels

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

The idea behind Janashakthi Insurance and Serendib Hotels 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.