Correlation Between Kandy Hotels and Jat Holdings

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

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

Diversification Opportunities for Kandy Hotels and Jat Holdings

-0.27

Correlation Coefficient

Kandy Hotels  Jat Holdings

Very good diversification

The 3 months correlation between Kandy and Jat is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kandy Hotels 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 Kandy Hotels 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 Kandy Hotels 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 Kandy Hotels i.e., Kandy Hotels and Jat Holdings go up and down completely randomly.

Pair Corralation between Kandy Hotels and Jat Holdings

Assuming the 90 days trading horizon Kandy Hotels is expected to under-perform the Jat Holdings. In addition to that, Kandy Hotels is 1.45 times more volatile than Jat Holdings PLC. It trades about -0.06 of its total potential returns per unit of risk. Jat Holdings PLC is currently generating about 0.05 per unit of volatility. If you would invest  2,550  in Jat Holdings PLC on December 29, 2024 and sell it today you would earn a total of  120.00  from holding Jat Holdings PLC or generate 4.71% return on investment over 90 days.

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

Kandy Hotels  vs.  Jat Holdings PLC

Kandy Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kandy Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 4 (%) 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 Kandy Hotels and Jat Holdings

The main advantage of trading using opposite Kandy Hotels and Jat Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kandy Hotels 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 Kandy Hotels 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.