Correlation Between John Keells and RENUKA FOODS

Can any of the company-specific risk be diversified away by investing in both John Keells and RENUKA FOODS 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 RENUKA FOODS 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 RENUKA FOODS PLC, you can compare the effects of market volatilities on John Keells and RENUKA FOODS 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 RENUKA FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Keells and RENUKA FOODS.

Diversification Opportunities for John Keells and RENUKA FOODS

0.18

Correlation Coefficient

John Keells  RENUKA FOODS

Average diversification

The 3 months correlation between John and RENUKA is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding John Keells Hotels and RENUKA FOODS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENUKA FOODS PLC 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 RENUKA FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENUKA FOODS PLC has no effect on the direction of John Keells i.e., John Keells and RENUKA FOODS go up and down completely randomly.

Pair Corralation between John Keells and RENUKA FOODS

Assuming the 90 days trading horizon John Keells Hotels is expected to generate 1.2 times more return on investment than RENUKA FOODS. However, John Keells is 1.2 times more volatile than RENUKA FOODS PLC. It trades about 0.01 of its potential returns per unit of risk. RENUKA FOODS PLC is currently generating about 0.01 per unit of risk. If you would invest  1,880  in John Keells Hotels on September 16, 2024 and sell it today you would earn a total of  0.00  from holding John Keells Hotels or generate 0.0% return on investment over 90 days.

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

John Keells Hotels  vs.  RENUKA FOODS PLC

John Keells Hotels

Risk-Adjusted Performance

18 of 100

Solid

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

RENUKA FOODS PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RENUKA FOODS PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, RENUKA FOODS 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 RENUKA FOODS

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

The idea behind John Keells Hotels and RENUKA FOODS 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.