Correlation Between Tal Lanka and Pegasus Hotels

Can any of the company-specific risk be diversified away by investing in both Tal Lanka and Pegasus Hotels 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 Pegasus Hotels 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 Pegasus Hotels of, you can compare the effects of market volatilities on Tal Lanka and Pegasus Hotels 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 Pegasus Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tal Lanka and Pegasus Hotels.

Diversification Opportunities for Tal Lanka and Pegasus Hotels

0.82

Correlation Coefficient

Tal Lanka  Pegasus Hotels

Very poor diversification

The 3 months correlation between Tal and Pegasus is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tal Lanka Hotels and Pegasus Hotels of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegasus Hotels 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 Pegasus Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegasus Hotels has no effect on the direction of Tal Lanka i.e., Tal Lanka and Pegasus Hotels go up and down completely randomly.

Pair Corralation between Tal Lanka and Pegasus Hotels

Assuming the 90 days trading horizon Tal Lanka is expected to generate 1.76 times less return on investment than Pegasus Hotels. But when comparing it to its historical volatility, Tal Lanka Hotels is 1.36 times less risky than Pegasus Hotels. It trades about 0.14 of its potential returns per unit of risk. Pegasus Hotels of is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,750  in Pegasus Hotels of on October 9, 2024 and sell it today you would earn a total of  1,090  from holding Pegasus Hotels of or generate 39.64% return on investment over 90 days.

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

Tal Lanka Hotels  vs.  Pegasus Hotels of

Tal Lanka Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tal Lanka Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tal Lanka sustained solid returns over the last few months and may actually be approaching a breakup point.

Pegasus Hotels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pegasus Hotels of are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pegasus Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tal Lanka and Pegasus Hotels

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

The idea behind Tal Lanka Hotels and Pegasus Hotels of 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.