Correlation Between SERENDIB HOTELS and Convenience Foods

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

Diversification Opportunities for SERENDIB HOTELS and Convenience Foods

0.86

Correlation Coefficient

SERENDIB HOTELS  Convenience Foods

Very poor diversification

The 3 months correlation between SERENDIB and Convenience is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SERENDIB HOTELS PLC and Convenience Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Convenience Foods 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 Convenience Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Convenience Foods PLC has no effect on the direction of SERENDIB HOTELS i.e., SERENDIB HOTELS and Convenience Foods go up and down completely randomly.

Pair Corralation between SERENDIB HOTELS and Convenience Foods

Assuming the 90 days trading horizon SERENDIB HOTELS PLC is expected to generate 1.42 times more return on investment than Convenience Foods. However, SERENDIB HOTELS is 1.42 times more volatile than Convenience Foods PLC. It trades about 0.24 of its potential returns per unit of risk. Convenience Foods PLC is currently generating about 0.21 per unit of risk. If you would invest  980.00  in SERENDIB HOTELS PLC on October 7, 2024 and sell it today you would earn a total of  470.00  from holding SERENDIB HOTELS PLC or generate 47.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

SERENDIB HOTELS PLC  vs.  Convenience Foods PLC

SERENDIB HOTELS PLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SERENDIB HOTELS PLC are ranked lower than 19 (%) 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.

Convenience Foods PLC

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with SERENDIB HOTELS and Convenience Foods

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

The idea behind SERENDIB HOTELS PLC and Convenience Foods 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.