Correlation Between Pan Asia and CEYLON HOSPITALS

Can any of the company-specific risk be diversified away by investing in both Pan Asia and CEYLON 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 Pan Asia and CEYLON HOSPITALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pan Asia Banking and CEYLON HOSPITALS PLC, you can compare the effects of market volatilities on Pan Asia and CEYLON 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 Pan Asia with a short position of CEYLON HOSPITALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Asia and CEYLON HOSPITALS.

Diversification Opportunities for Pan Asia and CEYLON HOSPITALS

0.73

Correlation Coefficient

Pan Asia  CEYLON HOSPITALS

Poor diversification

The 3 months correlation between Pan and CEYLON is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Banking and CEYLON HOSPITALS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEYLON HOSPITALS PLC and Pan Asia 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 Pan Asia Banking are associated (or correlated) with CEYLON HOSPITALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEYLON HOSPITALS PLC has no effect on the direction of Pan Asia i.e., Pan Asia and CEYLON HOSPITALS go up and down completely randomly.

Pair Corralation between Pan Asia and CEYLON HOSPITALS

Assuming the 90 days trading horizon Pan Asia Banking is expected to generate 1.32 times more return on investment than CEYLON HOSPITALS. However, Pan Asia is 1.32 times more volatile than CEYLON HOSPITALS PLC. It trades about 0.38 of its potential returns per unit of risk. CEYLON HOSPITALS PLC is currently generating about 0.17 per unit of risk. If you would invest  2,390  in Pan Asia Banking on October 26, 2024 and sell it today you would earn a total of  1,520  from holding Pan Asia Banking or generate 63.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	70.69%
Values	Daily Returns

Pan Asia Banking  vs.  CEYLON HOSPITALS PLC

Pan Asia Banking

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Asia Banking are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pan Asia sustained solid returns over the last few months and may actually be approaching a breakup point.

CEYLON HOSPITALS PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CEYLON HOSPITALS PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CEYLON HOSPITALS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan Asia and CEYLON HOSPITALS

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

The idea behind Pan Asia Banking and CEYLON HOSPITALS PLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.