Correlation Between Tangerine Beach and Ceylinco Insurance

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

By analyzing existing cross correlation between Tangerine Beach Hotels and Ceylinco Insurance PLC, you can compare the effects of market volatilities on Tangerine Beach 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 Tangerine Beach with a short position of Ceylinco Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tangerine Beach and Ceylinco Insurance.

Diversification Opportunities for Tangerine Beach and Ceylinco Insurance

0.86

Correlation Coefficient

Tangerine Beach  Ceylinco Insurance

Very poor diversification

The 3 months correlation between Tangerine and Ceylinco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tangerine Beach Hotels 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 Tangerine Beach 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 Tangerine Beach Hotels 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 Tangerine Beach i.e., Tangerine Beach and Ceylinco Insurance go up and down completely randomly.

Pair Corralation between Tangerine Beach and Ceylinco Insurance

Assuming the 90 days trading horizon Tangerine Beach is expected to generate 1.51 times less return on investment than Ceylinco Insurance. In addition to that, Tangerine Beach is 1.04 times more volatile than Ceylinco Insurance PLC. It trades about 0.17 of its total potential returns per unit of risk. Ceylinco Insurance PLC is currently generating about 0.26 per unit of volatility. If you would invest  254,775  in Ceylinco Insurance PLC on October 13, 2024 and sell it today you would earn a total of  45,350  from holding Ceylinco Insurance PLC or generate 17.8% return on investment over 90 days.

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

Tangerine Beach Hotels  vs.  Ceylinco Insurance PLC

Tangerine Beach Hotels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tangerine Beach Hotels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tangerine Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

Ceylinco Insurance PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylinco Insurance PLC are ranked lower than 13 (%) 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 Tangerine Beach and Ceylinco Insurance

The main advantage of trading using opposite Tangerine Beach and Ceylinco Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tangerine Beach 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 Tangerine Beach Hotels 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.