Correlation Between SERENDIB HOTELS and John Keells

Can any of the company-specific risk be diversified away by investing in both SERENDIB HOTELS and John Keells 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 John Keells 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 John Keells Hotels, you can compare the effects of market volatilities on SERENDIB HOTELS and John Keells 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 John Keells. Check out your portfolio center. Please also check ongoing floating volatility patterns of SERENDIB HOTELS and John Keells.

Diversification Opportunities for SERENDIB HOTELS and John Keells

0.92

Correlation Coefficient

SERENDIB HOTELS  John Keells

Almost no diversification

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

Pair Corralation between SERENDIB HOTELS and John Keells

Assuming the 90 days trading horizon SERENDIB HOTELS is expected to generate 1.32 times less return on investment than John Keells. In addition to that, SERENDIB HOTELS is 1.68 times more volatile than John Keells Hotels. It trades about 0.16 of its total potential returns per unit of risk. John Keells Hotels is currently generating about 0.35 per unit of volatility. If you would invest  1,880  in John Keells Hotels on October 9, 2024 and sell it today you would earn a total of  230.00  from holding John Keells Hotels or generate 12.23% return on investment over 90 days.

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

SERENDIB HOTELS PLC  vs.  John Keells Hotels

SERENDIB HOTELS PLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SERENDIB HOTELS PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SERENDIB HOTELS sustained solid returns over the last few months and may actually be approaching a breakup point.

John Keells Hotels

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Keells Hotels are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, John Keells sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SERENDIB HOTELS and John Keells

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

The idea behind SERENDIB HOTELS PLC and John Keells Hotels 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.