Correlation Between Mahaweli Reach and Singhe Hospitals

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

Diversification Opportunities for Mahaweli Reach and Singhe Hospitals

0.09

Correlation Coefficient

Mahaweli Reach  Singhe Hospitals

Significant diversification

The 3 months correlation between Mahaweli and Singhe is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Mahaweli Reach Hotel and Singhe Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singhe Hospitals 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 Singhe Hospitals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singhe Hospitals has no effect on the direction of Mahaweli Reach i.e., Mahaweli Reach and Singhe Hospitals go up and down completely randomly.

Pair Corralation between Mahaweli Reach and Singhe Hospitals

Assuming the 90 days trading horizon Mahaweli Reach Hotel is expected to under-perform the Singhe Hospitals. But the stock apears to be less risky and, when comparing its historical volatility, Mahaweli Reach Hotel is 1.13 times less risky than Singhe Hospitals. The stock trades about -0.06 of its potential returns per unit of risk. The Singhe Hospitals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Singhe Hospitals on December 27, 2024 and sell it today you would earn a total of  20.00  from holding Singhe Hospitals or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Mahaweli Reach Hotel  vs.  Singhe Hospitals

Mahaweli Reach Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mahaweli Reach Hotel 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.

Singhe Hospitals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Singhe Hospitals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Singhe Hospitals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mahaweli Reach and Singhe Hospitals

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

The idea behind Mahaweli Reach Hotel and Singhe Hospitals 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.