Correlation Between Keells Food and Jat Holdings

Can any of the company-specific risk be diversified away by investing in both Keells Food and Jat Holdings 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 Keells Food and Jat Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keells Food Products and Jat Holdings PLC, you can compare the effects of market volatilities on Keells Food and Jat Holdings 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 Keells Food with a short position of Jat Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keells Food and Jat Holdings.

Diversification Opportunities for Keells Food and Jat Holdings

0.12

Correlation Coefficient

Keells Food  Jat Holdings

Average diversification

The 3 months correlation between Keells and Jat is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Keells Food Products and Jat Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jat Holdings PLC and Keells Food 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 Keells Food Products are associated (or correlated) with Jat Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jat Holdings PLC has no effect on the direction of Keells Food i.e., Keells Food and Jat Holdings go up and down completely randomly.

Pair Corralation between Keells Food and Jat Holdings

Assuming the 90 days trading horizon Keells Food Products is expected to generate 1.52 times more return on investment than Jat Holdings. However, Keells Food is 1.52 times more volatile than Jat Holdings PLC. It trades about -0.06 of its potential returns per unit of risk. Jat Holdings PLC is currently generating about -0.11 per unit of risk. If you would invest  17,050  in Keells Food Products on December 25, 2024 and sell it today you would lose (475.00) from holding Keells Food Products or give up 2.79% of portfolio value over 90 days.

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

Keells Food Products  vs.  Jat Holdings PLC

Keells Food Products

Risk-Adjusted Performance

Very Weak

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

Jat Holdings PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jat Holdings PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jat Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Keells Food and Jat Holdings

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

The idea behind Keells Food Products and Jat Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.