Correlation Between John Keells and Keells Food

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

Diversification Opportunities for John Keells and Keells Food

0.63

Correlation Coefficient

John Keells  Keells Food

Poor diversification

The 3 months correlation between John and Keells is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding John Keells Hotels and Keells Food Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keells Food Products 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 Keells Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keells Food Products has no effect on the direction of John Keells i.e., John Keells and Keells Food go up and down completely randomly.

Pair Corralation between John Keells and Keells Food

Assuming the 90 days trading horizon John Keells Hotels is expected to under-perform the Keells Food. But the stock apears to be less risky and, when comparing its historical volatility, John Keells Hotels is 1.05 times less risky than Keells Food. The stock trades about -0.39 of its potential returns per unit of risk. The Keells Food Products is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  18,000  in Keells Food Products on December 5, 2024 and sell it today you would lose (450.00) from holding Keells Food Products or give up 2.5% 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.  Keells Food Products

John Keells Hotels

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in John Keells Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, John Keells may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Keells Food Products

Risk-Adjusted Performance

Weak

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

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

The idea behind John Keells Hotels and Keells Food Products 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.