Correlation Between Sigiriya Village and E M

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

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

Diversification Opportunities for Sigiriya Village and E M

0.8

Correlation Coefficient

Sigiriya Village  E M

Very poor diversification

The 3 months correlation between Sigiriya and EMLN0000 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sigiriya Village Hotels 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 Sigiriya Village 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 Sigiriya Village Hotels 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 Sigiriya Village i.e., Sigiriya Village and E M go up and down completely randomly.

Pair Corralation between Sigiriya Village and E M

Assuming the 90 days trading horizon Sigiriya Village Hotels is expected to generate 0.95 times more return on investment than E M. However, Sigiriya Village Hotels is 1.06 times less risky than E M. It trades about 0.4 of its potential returns per unit of risk. E M L is currently generating about 0.12 per unit of risk. If you would invest  3,500  in Sigiriya Village Hotels on October 9, 2024 and sell it today you would earn a total of  5,000  from holding Sigiriya Village Hotels or generate 142.86% return on investment over 90 days.

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

Sigiriya Village Hotels  vs.  E M L

Sigiriya Village Hotels

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sigiriya Village Hotels are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sigiriya Village sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 9 (%) 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 Sigiriya Village and E M

The main advantage of trading using opposite Sigiriya Village and E M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigiriya Village 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 Sigiriya Village Hotels 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.