Correlation Between SERENDIB HOTELS and Senkadagala Finance

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

Diversification Opportunities for SERENDIB HOTELS and Senkadagala Finance

-0.44

Correlation Coefficient

SERENDIB HOTELS  Senkadagala Finance

Very good diversification

The 3 months correlation between SERENDIB and Senkadagala is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SERENDIB HOTELS PLC and Senkadagala Finance PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senkadagala Finance 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 Senkadagala Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senkadagala Finance PLC has no effect on the direction of SERENDIB HOTELS i.e., SERENDIB HOTELS and Senkadagala Finance go up and down completely randomly.

Pair Corralation between SERENDIB HOTELS and Senkadagala Finance

Assuming the 90 days trading horizon SERENDIB HOTELS PLC is expected to under-perform the Senkadagala Finance. But the stock apears to be less risky and, when comparing its historical volatility, SERENDIB HOTELS PLC is 1.58 times less risky than Senkadagala Finance. The stock trades about -0.11 of its potential returns per unit of risk. The Senkadagala Finance PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  41,600  in Senkadagala Finance PLC on December 29, 2024 and sell it today you would lose (575.00) from holding Senkadagala Finance PLC or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.41%
Values	Daily Returns

SERENDIB HOTELS PLC  vs.  Senkadagala Finance 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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Senkadagala Finance PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Senkadagala Finance PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Senkadagala Finance 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 Senkadagala Finance

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

The idea behind SERENDIB HOTELS PLC and Senkadagala Finance 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.