Correlation Between Peoples Insurance and Nuwara Eliya

Can any of the company-specific risk be diversified away by investing in both Peoples Insurance and Nuwara Eliya 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 Peoples Insurance and Nuwara Eliya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Peoples Insurance PLC and Nuwara Eliya Hotels, you can compare the effects of market volatilities on Peoples Insurance and Nuwara Eliya 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 Peoples Insurance with a short position of Nuwara Eliya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peoples Insurance and Nuwara Eliya.

Diversification Opportunities for Peoples Insurance and Nuwara Eliya

-0.53

Correlation Coefficient

Peoples Insurance  Nuwara Eliya

Excellent diversification

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

Pair Corralation between Peoples Insurance and Nuwara Eliya

Assuming the 90 days trading horizon Peoples Insurance is expected to generate 11.83 times less return on investment than Nuwara Eliya. In addition to that, Peoples Insurance is 1.39 times more volatile than Nuwara Eliya Hotels. It trades about 0.0 of its total potential returns per unit of risk. Nuwara Eliya Hotels is currently generating about 0.06 per unit of volatility. If you would invest  210,100  in Nuwara Eliya Hotels on December 26, 2024 and sell it today you would earn a total of  9,300  from holding Nuwara Eliya Hotels or generate 4.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.95%
Values	Daily Returns

Peoples Insurance PLC  vs.  Nuwara Eliya Hotels

Peoples Insurance PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peoples Insurance PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Peoples Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nuwara Eliya Hotels

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Peoples Insurance and Nuwara Eliya

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

The idea behind Peoples Insurance PLC and Nuwara Eliya Hotels 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.