Correlation Between Carson Cumberbatch and Lanka Realty

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

By analyzing existing cross correlation between Carson Cumberbatch PLC and Lanka Realty Investments, you can compare the effects of market volatilities on Carson Cumberbatch and Lanka Realty 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 Carson Cumberbatch with a short position of Lanka Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carson Cumberbatch and Lanka Realty.

Diversification Opportunities for Carson Cumberbatch and Lanka Realty

-0.03

Correlation Coefficient

Carson Cumberbatch  Lanka Realty

Good diversification

The 3 months correlation between Carson and Lanka is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Carson Cumberbatch PLC and Lanka Realty Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanka Realty Investments and Carson Cumberbatch 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 Carson Cumberbatch PLC are associated (or correlated) with Lanka Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanka Realty Investments has no effect on the direction of Carson Cumberbatch i.e., Carson Cumberbatch and Lanka Realty go up and down completely randomly.

Pair Corralation between Carson Cumberbatch and Lanka Realty

Assuming the 90 days trading horizon Carson Cumberbatch PLC is expected to generate 0.67 times more return on investment than Lanka Realty. However, Carson Cumberbatch PLC is 1.48 times less risky than Lanka Realty. It trades about 0.26 of its potential returns per unit of risk. Lanka Realty Investments is currently generating about 0.04 per unit of risk. If you would invest  26,600  in Carson Cumberbatch PLC on September 13, 2024 and sell it today you would earn a total of  7,775  from holding Carson Cumberbatch PLC or generate 29.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.38%
Values	Daily Returns

Carson Cumberbatch PLC  vs.  Lanka Realty Investments

Carson Cumberbatch PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carson Cumberbatch PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carson Cumberbatch sustained solid returns over the last few months and may actually be approaching a breakup point.

Lanka Realty Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lanka Realty Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lanka Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carson Cumberbatch and Lanka Realty

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

The idea behind Carson Cumberbatch PLC and Lanka Realty Investments 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.