Correlation Between Citrus Leisure and Hotel Sigiriya

Can any of the company-specific risk be diversified away by investing in both Citrus Leisure and Hotel Sigiriya 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 Hotel Sigiriya 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 Hotel Sigiriya PLC, you can compare the effects of market volatilities on Citrus Leisure and Hotel Sigiriya 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 Hotel Sigiriya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citrus Leisure and Hotel Sigiriya.

Diversification Opportunities for Citrus Leisure and Hotel Sigiriya

-0.2

Correlation Coefficient

Citrus Leisure  Hotel Sigiriya

Good diversification

The 3 months correlation between Citrus and Hotel is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citrus Leisure PLC and Hotel Sigiriya PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Sigiriya 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 Hotel Sigiriya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Sigiriya PLC has no effect on the direction of Citrus Leisure i.e., Citrus Leisure and Hotel Sigiriya go up and down completely randomly.

Pair Corralation between Citrus Leisure and Hotel Sigiriya

Assuming the 90 days trading horizon Citrus Leisure PLC is expected to under-perform the Hotel Sigiriya. But the stock apears to be less risky and, when comparing its historical volatility, Citrus Leisure PLC is 1.63 times less risky than Hotel Sigiriya. The stock trades about -0.11 of its potential returns per unit of risk. The Hotel Sigiriya PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,800  in Hotel Sigiriya PLC on October 25, 2024 and sell it today you would earn a total of  540.00  from holding Hotel Sigiriya PLC or generate 6.92% return on investment over 90 days.

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

Citrus Leisure PLC  vs.  Hotel Sigiriya 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.

Hotel Sigiriya PLC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Sigiriya PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hotel Sigiriya sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citrus Leisure and Hotel Sigiriya

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

The idea behind Citrus Leisure PLC and Hotel Sigiriya 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.