Correlation Between Lanka IOC and John Keells

Can any of the company-specific risk be diversified away by investing in both Lanka IOC and John Keells 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 Lanka IOC and John Keells into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lanka IOC PLC and John Keells Hotels, you can compare the effects of market volatilities on Lanka IOC and John Keells 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 Lanka IOC with a short position of John Keells. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lanka IOC and John Keells.

Diversification Opportunities for Lanka IOC and John Keells

0.0

Correlation Coefficient

Lanka IOC  John Keells

Pay attention - limited upside

The 3 months correlation between Lanka and John is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lanka IOC PLC and John Keells Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Keells Hotels and Lanka IOC 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 Lanka IOC PLC are associated (or correlated) with John Keells. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Keells Hotels has no effect on the direction of Lanka IOC i.e., Lanka IOC and John Keells go up and down completely randomly.

Pair Corralation between Lanka IOC and John Keells

If you would invest  1,700  in John Keells Hotels on October 10, 2024 and sell it today you would earn a total of  410.00  from holding John Keells Hotels or generate 24.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.21%
Values	Daily Returns

Lanka IOC PLC  vs.  John Keells Hotels

Lanka IOC PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lanka IOC PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lanka IOC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

John Keells Hotels

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Keells Hotels are ranked lower than 17 (%) 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.

Pair Trading with Lanka IOC and John Keells

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

The idea behind Lanka IOC PLC and John Keells Hotels 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.