Correlation Between John Keells and Asiri Surgical

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

By analyzing existing cross correlation between John Keells Hotels and Asiri Surgical Hospital, you can compare the effects of market volatilities on John Keells and Asiri Surgical 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 John Keells with a short position of Asiri Surgical. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Keells and Asiri Surgical.

Diversification Opportunities for John Keells and Asiri Surgical

0.65

Correlation Coefficient

John Keells  Asiri Surgical

Poor diversification

The 3 months correlation between John and Asiri is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding John Keells Hotels and Asiri Surgical Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiri Surgical Hospital and John Keells 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 John Keells Hotels are associated (or correlated) with Asiri Surgical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiri Surgical Hospital has no effect on the direction of John Keells i.e., John Keells and Asiri Surgical go up and down completely randomly.

Pair Corralation between John Keells and Asiri Surgical

Assuming the 90 days trading horizon John Keells Hotels is expected to generate 1.13 times more return on investment than Asiri Surgical. However, John Keells is 1.13 times more volatile than Asiri Surgical Hospital. It trades about 0.0 of its potential returns per unit of risk. Asiri Surgical Hospital is currently generating about -0.03 per unit of risk. If you would invest  2,080  in John Keells Hotels on December 25, 2024 and sell it today you would lose (30.00) from holding John Keells Hotels or give up 1.44% of portfolio value over 90 days.

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

John Keells Hotels  vs.  Asiri Surgical Hospital

John Keells Hotels

Risk-Adjusted Performance

Very Weak

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

Asiri Surgical Hospital

Risk-Adjusted Performance

Very Weak

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

Pair Trading with John Keells and Asiri Surgical

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

The idea behind John Keells Hotels and Asiri Surgical Hospital 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.