Correlation Between Carson Cumberbatch and Ceylon Cold

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

Diversification Opportunities for Carson Cumberbatch and Ceylon Cold

0.81

Correlation Coefficient

Carson Cumberbatch  Ceylon Cold

Very poor diversification

The 3 months correlation between Carson and Ceylon is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Carson Cumberbatch PLC and Ceylon Cold Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Cold Stores 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 Ceylon Cold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Cold Stores has no effect on the direction of Carson Cumberbatch i.e., Carson Cumberbatch and Ceylon Cold go up and down completely randomly.

Pair Corralation between Carson Cumberbatch and Ceylon Cold

Assuming the 90 days trading horizon Carson Cumberbatch is expected to generate 1.03 times less return on investment than Ceylon Cold. In addition to that, Carson Cumberbatch is 1.03 times more volatile than Ceylon Cold Stores. It trades about 0.24 of its total potential returns per unit of risk. Ceylon Cold Stores is currently generating about 0.25 per unit of volatility. If you would invest  5,250  in Ceylon Cold Stores on September 15, 2024 and sell it today you would earn a total of  1,450  from holding Ceylon Cold Stores or generate 27.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.0%
Values	Daily Returns

Carson Cumberbatch PLC  vs.  Ceylon Cold Stores

Carson Cumberbatch PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carson Cumberbatch PLC are ranked lower than 18 (%) 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.

Ceylon Cold Stores

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Cold Stores are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Cold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carson Cumberbatch and Ceylon Cold

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

The idea behind Carson Cumberbatch PLC and Ceylon Cold Stores 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.