Correlation Between Senkadagala Finance and E M

Can any of the company-specific risk be diversified away by investing in both Senkadagala Finance and E M 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 Senkadagala Finance and E M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Senkadagala Finance PLC and E M L, you can compare the effects of market volatilities on Senkadagala Finance and E M 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 Senkadagala Finance with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Senkadagala Finance and E M.

Diversification Opportunities for Senkadagala Finance and E M

-0.27

Correlation Coefficient

Senkadagala Finance  E M

Very good diversification

The 3 months correlation between Senkadagala and EMLN0000 is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Senkadagala Finance PLC and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and Senkadagala Finance 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 Senkadagala Finance PLC are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of Senkadagala Finance i.e., Senkadagala Finance and E M go up and down completely randomly.

Pair Corralation between Senkadagala Finance and E M

Assuming the 90 days trading horizon Senkadagala Finance PLC is expected to generate 0.38 times more return on investment than E M. However, Senkadagala Finance PLC is 2.62 times less risky than E M. It trades about 0.37 of its potential returns per unit of risk. E M L is currently generating about 0.09 per unit of risk. If you would invest  37,500  in Senkadagala Finance PLC on October 9, 2024 and sell it today you would earn a total of  6,625  from holding Senkadagala Finance PLC or generate 17.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.15%
Values	Daily Returns

Senkadagala Finance PLC  vs.  E M L

Senkadagala Finance PLC

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Senkadagala Finance PLC are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Senkadagala Finance sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Senkadagala Finance and E M

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

The idea behind Senkadagala Finance PLC and E M L 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.