Correlation Between Lion Brewery and Palm Garden

Can any of the company-specific risk be diversified away by investing in both Lion Brewery and Palm Garden 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 Lion Brewery and Palm Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lion Brewery Ceylon and Palm Garden Hotels, you can compare the effects of market volatilities on Lion Brewery and Palm Garden 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 Lion Brewery with a short position of Palm Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Brewery and Palm Garden.

Diversification Opportunities for Lion Brewery and Palm Garden

0.27

Correlation Coefficient

Lion Brewery  Palm Garden

Modest diversification

The 3 months correlation between Lion and Palm is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lion Brewery Ceylon and Palm Garden Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palm Garden Hotels and Lion Brewery 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 Lion Brewery Ceylon are associated (or correlated) with Palm Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palm Garden Hotels has no effect on the direction of Lion Brewery i.e., Lion Brewery and Palm Garden go up and down completely randomly.

Pair Corralation between Lion Brewery and Palm Garden

Assuming the 90 days trading horizon Lion Brewery Ceylon is expected to generate 0.51 times more return on investment than Palm Garden. However, Lion Brewery Ceylon is 1.96 times less risky than Palm Garden. It trades about 0.07 of its potential returns per unit of risk. Palm Garden Hotels is currently generating about -0.05 per unit of risk. If you would invest  120,225  in Lion Brewery Ceylon on December 25, 2024 and sell it today you would earn a total of  7,700  from holding Lion Brewery Ceylon or generate 6.4% return on investment over 90 days.

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

Lion Brewery Ceylon  vs.  Palm Garden Hotels

Lion Brewery Ceylon

Risk-Adjusted Performance

Modest

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

Palm Garden Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Palm Garden Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lion Brewery and Palm Garden

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

The idea behind Lion Brewery Ceylon and Palm Garden 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.