Correlation Between Singhe Hospitals and Lanka Ceramic

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Can any of the company-specific risk be diversified away by investing in both Singhe Hospitals and Lanka Ceramic 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 Singhe Hospitals and Lanka Ceramic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Singhe Hospitals and Lanka Ceramic PLC, you can compare the effects of market volatilities on Singhe Hospitals and Lanka Ceramic 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 Singhe Hospitals with a short position of Lanka Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singhe Hospitals and Lanka Ceramic.

Diversification Opportunities for Singhe Hospitals and Lanka Ceramic

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Singhe and Lanka is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Singhe Hospitals and Lanka Ceramic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanka Ceramic PLC and Singhe Hospitals 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 Singhe Hospitals are associated (or correlated) with Lanka Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanka Ceramic PLC has no effect on the direction of Singhe Hospitals i.e., Singhe Hospitals and Lanka Ceramic go up and down completely randomly.

Pair Corralation between Singhe Hospitals and Lanka Ceramic

Assuming the 90 days trading horizon Singhe Hospitals is expected to generate 1.49 times less return on investment than Lanka Ceramic. In addition to that, Singhe Hospitals is 1.11 times more volatile than Lanka Ceramic PLC. It trades about 0.09 of its total potential returns per unit of risk. Lanka Ceramic PLC is currently generating about 0.15 per unit of volatility. If you would invest  10,650  in Lanka Ceramic PLC on October 12, 2024 and sell it today you would earn a total of  2,900  from holding Lanka Ceramic PLC or generate 27.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy94.92%
ValuesDaily Returns

Singhe Hospitals  vs.  Lanka Ceramic PLC

 Performance 
       Timeline  
Singhe Hospitals 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Singhe Hospitals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Singhe Hospitals sustained solid returns over the last few months and may actually be approaching a breakup point.
Lanka Ceramic PLC 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Lanka Ceramic PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lanka Ceramic sustained solid returns over the last few months and may actually be approaching a breakup point.

Singhe Hospitals and Lanka Ceramic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Singhe Hospitals and Lanka Ceramic

The main advantage of trading using opposite Singhe Hospitals and Lanka Ceramic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singhe Hospitals position performs unexpectedly, Lanka Ceramic 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 Lanka Ceramic will offset losses from the drop in Lanka Ceramic's long position.
The idea behind Singhe Hospitals and Lanka Ceramic 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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