Correlation Between EX PACK and Colombo Investment

Can any of the company-specific risk be diversified away by investing in both EX PACK and Colombo Investment 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 EX PACK and Colombo Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EX PACK RUGATED CARTONS and Colombo Investment Trust, you can compare the effects of market volatilities on EX PACK and Colombo Investment 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 EX PACK with a short position of Colombo Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of EX PACK and Colombo Investment.

Diversification Opportunities for EX PACK and Colombo Investment

0.53

Correlation Coefficient

EX PACK  Colombo Investment

Very weak diversification

The 3 months correlation between PACKN0000 and Colombo is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding EX PACK RUGATED CARTONS and Colombo Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colombo Investment Trust and EX PACK 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 EX PACK RUGATED CARTONS are associated (or correlated) with Colombo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colombo Investment Trust has no effect on the direction of EX PACK i.e., EX PACK and Colombo Investment go up and down completely randomly.

Pair Corralation between EX PACK and Colombo Investment

Assuming the 90 days trading horizon EX PACK is expected to generate 3.32 times less return on investment than Colombo Investment. But when comparing it to its historical volatility, EX PACK RUGATED CARTONS is 2.51 times less risky than Colombo Investment. It trades about 0.14 of its potential returns per unit of risk. Colombo Investment Trust is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  9,050  in Colombo Investment Trust on October 10, 2024 and sell it today you would earn a total of  3,075  from holding Colombo Investment Trust or generate 33.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.88%
Values	Daily Returns

EX PACK RUGATED CARTONS  vs.  Colombo Investment Trust

EX PACK RUGATED

Risk-Adjusted Performance

11 of 100

Good

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

Colombo Investment Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colombo Investment Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Colombo Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EX PACK and Colombo Investment

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

The idea behind EX PACK RUGATED CARTONS and Colombo Investment Trust 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.