Correlation Between Pan Asia and SEYLAN BANK

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

Diversification Opportunities for Pan Asia and SEYLAN BANK

0.97

Correlation Coefficient

Pan Asia  SEYLAN BANK

Almost no diversification

The 3 months correlation between Pan and SEYLAN is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Banking and SEYLAN BANK PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEYLAN BANK 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 SEYLAN BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEYLAN BANK PLC has no effect on the direction of Pan Asia i.e., Pan Asia and SEYLAN BANK go up and down completely randomly.

Pair Corralation between Pan Asia and SEYLAN BANK

Assuming the 90 days trading horizon Pan Asia Banking is expected to generate 0.92 times more return on investment than SEYLAN BANK. However, Pan Asia Banking is 1.09 times less risky than SEYLAN BANK. It trades about 0.37 of its potential returns per unit of risk. SEYLAN BANK PLC is currently generating about 0.26 per unit of risk. If you would invest  2,390  in Pan Asia Banking on October 27, 2024 and sell it today you would earn a total of  1,510  from holding Pan Asia Banking or generate 63.18% return on investment over 90 days.

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

Pan Asia Banking  vs.  SEYLAN BANK 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.

SEYLAN BANK PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEYLAN BANK PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SEYLAN BANK sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan Asia and SEYLAN BANK

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

The idea behind Pan Asia Banking and SEYLAN BANK 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 CEOs Directory module to screen CEOs from public companies around the world.