Correlation Between Carson Cumberbatch and Lion Brewery

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

Diversification Opportunities for Carson Cumberbatch and Lion Brewery

0.74

Correlation Coefficient

Carson Cumberbatch  Lion Brewery

Poor diversification

The 3 months correlation between Carson and Lion is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Carson Cumberbatch PLC and Lion Brewery Ceylon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Brewery Ceylon 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 Lion Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Brewery Ceylon has no effect on the direction of Carson Cumberbatch i.e., Carson Cumberbatch and Lion Brewery go up and down completely randomly.

Pair Corralation between Carson Cumberbatch and Lion Brewery

Assuming the 90 days trading horizon Carson Cumberbatch is expected to generate 2.49 times less return on investment than Lion Brewery. In addition to that, Carson Cumberbatch is 1.06 times more volatile than Lion Brewery Ceylon. It trades about 0.04 of its total potential returns per unit of risk. Lion Brewery Ceylon is currently generating about 0.11 per unit of volatility. If you would invest  55,950  in Lion Brewery Ceylon on September 13, 2024 and sell it today you would earn a total of  63,050  from holding Lion Brewery Ceylon or generate 112.69% return on investment over 90 days.

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

Carson Cumberbatch PLC  vs.  Lion Brewery Ceylon

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.

Lion Brewery Ceylon

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Carson Cumberbatch and Lion Brewery

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

The idea behind Carson Cumberbatch PLC and Lion Brewery Ceylon 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.