Correlation Between Mahaweli Reach and Galadari Hotels

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Mahaweli Reach and Galadari Hotels 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 Galadari Hotels 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 Galadari Hotels Lanka, you can compare the effects of market volatilities on Mahaweli Reach and Galadari Hotels 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 Galadari Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mahaweli Reach and Galadari Hotels.

Diversification Opportunities for Mahaweli Reach and Galadari Hotels

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Mahaweli and Galadari is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Mahaweli Reach Hotel and Galadari Hotels Lanka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galadari Hotels Lanka 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 Galadari Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galadari Hotels Lanka has no effect on the direction of Mahaweli Reach i.e., Mahaweli Reach and Galadari Hotels go up and down completely randomly.

Pair Corralation between Mahaweli Reach and Galadari Hotels

Assuming the 90 days trading horizon Mahaweli Reach Hotel is expected to generate 1.8 times more return on investment than Galadari Hotels. However, Mahaweli Reach is 1.8 times more volatile than Galadari Hotels Lanka. It trades about 0.21 of its potential returns per unit of risk. Galadari Hotels Lanka is currently generating about 0.13 per unit of risk. If you would invest  1,510  in Mahaweli Reach Hotel on October 1, 2024 and sell it today you would earn a total of  730.00  from holding Mahaweli Reach Hotel or generate 48.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.33%
ValuesDaily Returns

Mahaweli Reach Hotel  vs.  Galadari Hotels Lanka

 Performance 
       Timeline  
Mahaweli Reach Hotel 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
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.
Galadari Hotels Lanka 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Galadari Hotels Lanka are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Galadari Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Mahaweli Reach and Galadari Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mahaweli Reach and Galadari Hotels

The main advantage of trading using opposite Mahaweli Reach and Galadari Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mahaweli Reach position performs unexpectedly, Galadari Hotels 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 Galadari Hotels will offset losses from the drop in Galadari Hotels' long position.
The idea behind Mahaweli Reach Hotel and Galadari Hotels Lanka 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.
Check out your portfolio center.
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

Other Complementary Tools

Fundamental Analysis
View fundamental data based on most recent published financial statements
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated