Correlation Between John Keells and Ceylon Guardian

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

Diversification Opportunities for John Keells and Ceylon Guardian

0.8

Correlation Coefficient

John Keells  Ceylon Guardian

Very poor diversification

The 3 months correlation between John and Ceylon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding John Keells Hotels and Ceylon Guardian Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Guardian Inve 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 Ceylon Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Guardian Inve has no effect on the direction of John Keells i.e., John Keells and Ceylon Guardian go up and down completely randomly.

Pair Corralation between John Keells and Ceylon Guardian

Assuming the 90 days trading horizon John Keells Hotels is expected to generate 0.74 times more return on investment than Ceylon Guardian. However, John Keells Hotels is 1.35 times less risky than Ceylon Guardian. It trades about 0.0 of its potential returns per unit of risk. Ceylon Guardian Investment is currently generating about 0.0 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	Strong
Accuracy	100.0%
Values	Daily Returns

John Keells Hotels  vs.  Ceylon Guardian Investment

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.

Ceylon Guardian Inve

Risk-Adjusted Performance

Weak

Over the last 90 days Ceylon Guardian Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ceylon Guardian 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 Ceylon Guardian

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

The idea behind John Keells Hotels and Ceylon Guardian Investment 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.