Correlation Between Singhe Hospitals and Union Chemicals

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

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

Diversification Opportunities for Singhe Hospitals and Union Chemicals

0.61

Correlation Coefficient

Singhe Hospitals  Union Chemicals

Poor diversification

The 3 months correlation between Singhe and Union is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Singhe Hospitals and Union Chemicals Lanka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Chemicals Lanka 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 Union Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Chemicals Lanka has no effect on the direction of Singhe Hospitals i.e., Singhe Hospitals and Union Chemicals go up and down completely randomly.

Pair Corralation between Singhe Hospitals and Union Chemicals

Assuming the 90 days trading horizon Singhe Hospitals is expected to generate 3.39 times more return on investment than Union Chemicals. However, Singhe Hospitals is 3.39 times more volatile than Union Chemicals Lanka. It trades about 0.04 of its potential returns per unit of risk. Union Chemicals Lanka is currently generating about 0.06 per unit of risk. If you would invest  270.00  in Singhe Hospitals on December 26, 2024 and sell it today you would earn a total of  10.00  from holding Singhe Hospitals or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.47%
Values	Daily Returns

Singhe Hospitals  vs.  Union Chemicals Lanka

Singhe Hospitals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Singhe Hospitals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Singhe Hospitals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Union Chemicals Lanka

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Chemicals Lanka are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Union Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Singhe Hospitals and Union Chemicals

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

The idea behind Singhe Hospitals and Union Chemicals Lanka 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.