Correlation Between Serendib Hotels and Dolphin Hotels

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

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

Diversification Opportunities for Serendib Hotels and Dolphin Hotels

0.92

Correlation Coefficient

Serendib Hotels  Dolphin Hotels

Almost no diversification

The 3 months correlation between Serendib and Dolphin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Serendib Hotels PLC and Dolphin Hotels PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolphin Hotels PLC and Serendib Hotels 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 Serendib Hotels PLC are associated (or correlated) with Dolphin Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolphin Hotels PLC has no effect on the direction of Serendib Hotels i.e., Serendib Hotels and Dolphin Hotels go up and down completely randomly.

Pair Corralation between Serendib Hotels and Dolphin Hotels

Assuming the 90 days trading horizon Serendib Hotels PLC is expected to under-perform the Dolphin Hotels. In addition to that, Serendib Hotels is 1.13 times more volatile than Dolphin Hotels PLC. It trades about -0.01 of its total potential returns per unit of risk. Dolphin Hotels PLC is currently generating about 0.0 per unit of volatility. If you would invest  5,050  in Dolphin Hotels PLC on December 4, 2024 and sell it today you would lose (100.00) from holding Dolphin Hotels PLC or give up 1.98% of portfolio value over 90 days.

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

Serendib Hotels PLC  vs.  Dolphin Hotels PLC

Serendib Hotels PLC

Risk-Adjusted Performance

Very Weak

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

Dolphin Hotels PLC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Serendib Hotels and Dolphin Hotels

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

The idea behind Serendib Hotels PLC and Dolphin Hotels 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.