Correlation Between EX PACK and Lion Brewery

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

Diversification Opportunities for EX PACK and Lion Brewery

0.56

Correlation Coefficient

EX PACK  Lion Brewery

Very weak diversification

The 3 months correlation between PACKN0000 and Lion is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding EX PACK RUGATED CARTONS and Lion Brewery Ceylon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Brewery Ceylon 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 Lion Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Brewery Ceylon has no effect on the direction of EX PACK i.e., EX PACK and Lion Brewery go up and down completely randomly.

Pair Corralation between EX PACK and Lion Brewery

Assuming the 90 days trading horizon EX PACK is expected to generate 1.3 times less return on investment than Lion Brewery. But when comparing it to its historical volatility, EX PACK RUGATED CARTONS is 1.4 times less risky than Lion Brewery. It trades about 0.17 of its potential returns per unit of risk. Lion Brewery Ceylon is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  105,025  in Lion Brewery Ceylon on October 9, 2024 and sell it today you would earn a total of  16,100  from holding Lion Brewery Ceylon or generate 15.33% return on investment over 90 days.

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

EX PACK RUGATED CARTONS  vs.  Lion Brewery Ceylon

EX PACK RUGATED

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EX PACK RUGATED CARTONS are ranked lower than 10 (%) 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.

Lion Brewery Ceylon

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with EX PACK and Lion Brewery

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

The idea behind EX PACK RUGATED CARTONS and Lion Brewery Ceylon 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..