Correlation Between Singhe Hospitals and Ceylinco Insurance

Can any of the company-specific risk be diversified away by investing in both Singhe Hospitals and Ceylinco Insurance 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 Ceylinco Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Singhe Hospitals and Ceylinco Insurance PLC, you can compare the effects of market volatilities on Singhe Hospitals and Ceylinco Insurance 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 Ceylinco Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singhe Hospitals and Ceylinco Insurance.

Diversification Opportunities for Singhe Hospitals and Ceylinco Insurance

0.52

Correlation Coefficient

Singhe Hospitals  Ceylinco Insurance

Very weak diversification

The 3 months correlation between Singhe and Ceylinco is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Singhe Hospitals and Ceylinco Insurance PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylinco Insurance 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 Ceylinco Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylinco Insurance PLC has no effect on the direction of Singhe Hospitals i.e., Singhe Hospitals and Ceylinco Insurance go up and down completely randomly.

Pair Corralation between Singhe Hospitals and Ceylinco Insurance

Assuming the 90 days trading horizon Singhe Hospitals is expected to generate 2.17 times less return on investment than Ceylinco Insurance. In addition to that, Singhe Hospitals is 1.48 times more volatile than Ceylinco Insurance PLC. It trades about 0.07 of its total potential returns per unit of risk. Ceylinco Insurance PLC is currently generating about 0.23 per unit of volatility. If you would invest  235,525  in Ceylinco Insurance PLC on October 25, 2024 and sell it today you would earn a total of  64,475  from holding Ceylinco Insurance PLC or generate 27.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	79.31%
Values	Daily Returns

Singhe Hospitals  vs.  Ceylinco Insurance PLC

Singhe Hospitals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Singhe Hospitals are ranked lower than 5 (%) 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.

Ceylinco Insurance PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylinco Insurance PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylinco Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singhe Hospitals and Ceylinco Insurance

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

The idea behind Singhe Hospitals and Ceylinco Insurance 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.