Correlation Between Mahaweli Reach and Arpico Insurance

Can any of the company-specific risk be diversified away by investing in both Mahaweli Reach and Arpico Insurance 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 Mahaweli Reach and Arpico Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mahaweli Reach Hotel and Arpico Insurance, you can compare the effects of market volatilities on Mahaweli Reach and Arpico Insurance 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 Mahaweli Reach with a short position of Arpico Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mahaweli Reach and Arpico Insurance.

Diversification Opportunities for Mahaweli Reach and Arpico Insurance

0.38

Correlation Coefficient

Mahaweli Reach  Arpico Insurance

Weak diversification

The 3 months correlation between Mahaweli and Arpico is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mahaweli Reach Hotel and Arpico Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arpico Insurance and Mahaweli Reach 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 Mahaweli Reach Hotel are associated (or correlated) with Arpico Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arpico Insurance has no effect on the direction of Mahaweli Reach i.e., Mahaweli Reach and Arpico Insurance go up and down completely randomly.

Pair Corralation between Mahaweli Reach and Arpico Insurance

Assuming the 90 days trading horizon Mahaweli Reach Hotel is expected to generate 1.03 times more return on investment than Arpico Insurance. However, Mahaweli Reach is 1.03 times more volatile than Arpico Insurance. It trades about 0.31 of its potential returns per unit of risk. Arpico Insurance is currently generating about 0.04 per unit of risk. If you would invest  1,410  in Mahaweli Reach Hotel on October 1, 2024 and sell it today you would earn a total of  830.00  from holding Mahaweli Reach Hotel or generate 58.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.84%
Values	Daily Returns

Mahaweli Reach Hotel  vs.  Arpico Insurance

Mahaweli Reach Hotel

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mahaweli Reach Hotel are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mahaweli Reach sustained solid returns over the last few months and may actually be approaching a breakup point.

Arpico Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arpico Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arpico Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mahaweli Reach and Arpico Insurance

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

The idea behind Mahaweli Reach Hotel and Arpico Insurance 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.