Correlation Between Prime Lands and Lanka Realty

Can any of the company-specific risk be diversified away by investing in both Prime Lands and Lanka Realty 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 Prime Lands and Lanka Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prime Lands Residencies and Lanka Realty Investments, you can compare the effects of market volatilities on Prime Lands and Lanka Realty 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 Prime Lands with a short position of Lanka Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Lands and Lanka Realty.

Diversification Opportunities for Prime Lands and Lanka Realty

0.49

Correlation Coefficient

Prime Lands  Lanka Realty

Very weak diversification

The 3 months correlation between Prime and Lanka is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Prime Lands Residencies and Lanka Realty Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanka Realty Investments and Prime Lands 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 Prime Lands Residencies are associated (or correlated) with Lanka Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanka Realty Investments has no effect on the direction of Prime Lands i.e., Prime Lands and Lanka Realty go up and down completely randomly.

Pair Corralation between Prime Lands and Lanka Realty

Assuming the 90 days trading horizon Prime Lands is expected to generate 1.88 times less return on investment than Lanka Realty. But when comparing it to its historical volatility, Prime Lands Residencies is 1.81 times less risky than Lanka Realty. It trades about 0.34 of its potential returns per unit of risk. Lanka Realty Investments is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in Lanka Realty Investments on September 29, 2024 and sell it today you would earn a total of  440.00  from holding Lanka Realty Investments or generate 44.0% return on investment over 90 days.

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

Prime Lands Residencies  vs.  Lanka Realty Investments

Prime Lands Residencies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Lands Residencies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prime Lands sustained solid returns over the last few months and may actually be approaching a breakup point.

Lanka Realty Investments

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Prime Lands and Lanka Realty

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

The idea behind Prime Lands Residencies and Lanka Realty Investments 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.