Correlation Between Distilleries Company and Keells Food

Can any of the company-specific risk be diversified away by investing in both Distilleries Company and Keells Food 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 Distilleries Company and Keells Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Distilleries Company of and Keells Food Products, you can compare the effects of market volatilities on Distilleries Company and Keells Food 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 Distilleries Company with a short position of Keells Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distilleries Company and Keells Food.

Diversification Opportunities for Distilleries Company and Keells Food

0.76

Correlation Coefficient

Distilleries Company  Keells Food

Poor diversification

The 3 months correlation between Distilleries and Keells is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Distilleries Company of and Keells Food Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keells Food Products and Distilleries Company 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 Distilleries Company of are associated (or correlated) with Keells Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keells Food Products has no effect on the direction of Distilleries Company i.e., Distilleries Company and Keells Food go up and down completely randomly.

Pair Corralation between Distilleries Company and Keells Food

Assuming the 90 days trading horizon Distilleries Company of is expected to generate 0.83 times more return on investment than Keells Food. However, Distilleries Company of is 1.2 times less risky than Keells Food. It trades about 0.39 of its potential returns per unit of risk. Keells Food Products is currently generating about 0.19 per unit of risk. If you would invest  2,540  in Distilleries Company of on September 12, 2024 and sell it today you would earn a total of  960.00  from holding Distilleries Company of or generate 37.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.66%
Values	Daily Returns

Distilleries Company of  vs.  Keells Food Products

Distilleries Company

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Distilleries Company of are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Distilleries Company sustained solid returns over the last few months and may actually be approaching a breakup point.

Keells Food Products

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Distilleries Company and Keells Food

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

The idea behind Distilleries Company of and Keells Food Products 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.