Correlation Between John Keells and HNB Finance

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

Diversification Opportunities for John Keells and HNB Finance

-0.09

Correlation Coefficient

John Keells  HNB Finance

Good diversification

The 3 months correlation between John and HNB is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding John Keells Hotels and HNB Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNB Finance 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 HNB Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNB Finance has no effect on the direction of John Keells i.e., John Keells and HNB Finance go up and down completely randomly.

Pair Corralation between John Keells and HNB Finance

Assuming the 90 days trading horizon John Keells Hotels is expected to generate 1.2 times more return on investment than HNB Finance. However, John Keells is 1.2 times more volatile than HNB Finance. It trades about 0.0 of its potential returns per unit of risk. HNB Finance is currently generating about -0.14 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

John Keells Hotels  vs.  HNB Finance

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.

HNB Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days HNB Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with John Keells and HNB Finance

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

The idea behind John Keells Hotels and HNB Finance 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.