Correlation Between Citrus Leisure and Ceylon Hospitals

Can any of the company-specific risk be diversified away by investing in both Citrus Leisure and Ceylon Hospitals 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 Citrus Leisure and Ceylon Hospitals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citrus Leisure PLC and Ceylon Hospitals PLC, you can compare the effects of market volatilities on Citrus Leisure and Ceylon Hospitals 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 Citrus Leisure with a short position of Ceylon Hospitals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citrus Leisure and Ceylon Hospitals.

Diversification Opportunities for Citrus Leisure and Ceylon Hospitals

-0.4

Correlation Coefficient

Citrus Leisure  Ceylon Hospitals

Very good diversification

The 3 months correlation between Citrus and Ceylon is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citrus Leisure PLC and Ceylon Hospitals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Hospitals PLC and Citrus Leisure 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 Citrus Leisure PLC are associated (or correlated) with Ceylon Hospitals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Hospitals PLC has no effect on the direction of Citrus Leisure i.e., Citrus Leisure and Ceylon Hospitals go up and down completely randomly.

Pair Corralation between Citrus Leisure and Ceylon Hospitals

Assuming the 90 days trading horizon Citrus Leisure PLC is expected to under-perform the Ceylon Hospitals. But the stock apears to be less risky and, when comparing its historical volatility, Citrus Leisure PLC is 1.16 times less risky than Ceylon Hospitals. The stock trades about -0.1 of its potential returns per unit of risk. The Ceylon Hospitals PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,800  in Ceylon Hospitals PLC on October 25, 2024 and sell it today you would earn a total of  350.00  from holding Ceylon Hospitals PLC or generate 2.97% return on investment over 90 days.

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

Citrus Leisure PLC  vs.  Ceylon Hospitals PLC

Citrus Leisure PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ceylon Hospitals PLC

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Citrus Leisure and Ceylon Hospitals

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

The idea behind Citrus Leisure PLC and Ceylon Hospitals 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.