Correlation Between John Keells and Prime Lands

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

Diversification Opportunities for John Keells and Prime Lands

0.39

Correlation Coefficient

John Keells  Prime Lands

Weak diversification

The 3 months correlation between John and Prime is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding John Keells Hotels and Prime Lands Residencies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Lands Residencies 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 Prime Lands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Lands Residencies has no effect on the direction of John Keells i.e., John Keells and Prime Lands go up and down completely randomly.

Pair Corralation between John Keells and Prime Lands

Assuming the 90 days trading horizon John Keells Hotels is expected to generate 0.55 times more return on investment than Prime Lands. However, John Keells Hotels is 1.82 times less risky than Prime Lands. It trades about 0.42 of its potential returns per unit of risk. Prime Lands Residencies is currently generating about 0.09 per unit of risk. If you would invest  1,940  in John Keells Hotels on October 23, 2024 and sell it today you would earn a total of  360.00  from holding John Keells Hotels or generate 18.56% return on investment over 90 days.

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

John Keells Hotels  vs.  Prime Lands Residencies

John Keells Hotels

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Keells Hotels are ranked lower than 22 (%) 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.

Prime Lands Residencies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Lands Residencies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prime Lands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Keells and Prime Lands

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

The idea behind John Keells Hotels and Prime Lands Residencies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.