Correlation Between Tal Lanka and Nations Trust

Can any of the company-specific risk be diversified away by investing in both Tal Lanka and Nations Trust 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 Tal Lanka and Nations Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tal Lanka Hotels and Nations Trust Bank, you can compare the effects of market volatilities on Tal Lanka and Nations Trust 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 Tal Lanka with a short position of Nations Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tal Lanka and Nations Trust.

Diversification Opportunities for Tal Lanka and Nations Trust

0.31

Correlation Coefficient

Tal Lanka  Nations Trust

Weak diversification

The 3 months correlation between Tal and Nations is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tal Lanka Hotels and Nations Trust Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nations Trust Bank and Tal Lanka 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 Tal Lanka Hotels are associated (or correlated) with Nations Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nations Trust Bank has no effect on the direction of Tal Lanka i.e., Tal Lanka and Nations Trust go up and down completely randomly.

Pair Corralation between Tal Lanka and Nations Trust

Assuming the 90 days trading horizon Tal Lanka Hotels is expected to under-perform the Nations Trust. In addition to that, Tal Lanka is 1.63 times more volatile than Nations Trust Bank. It trades about -0.04 of its total potential returns per unit of risk. Nations Trust Bank is currently generating about 0.03 per unit of volatility. If you would invest  18,525  in Nations Trust Bank on December 30, 2024 and sell it today you would earn a total of  475.00  from holding Nations Trust Bank or generate 2.56% return on investment over 90 days.

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

Tal Lanka Hotels  vs.  Nations Trust Bank

Tal Lanka Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tal Lanka Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nations Trust Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nations Trust Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nations Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tal Lanka and Nations Trust

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

The idea behind Tal Lanka Hotels and Nations Trust Bank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.