Correlation Between Jat Holdings and Sri Lanka

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

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

Diversification Opportunities for Jat Holdings and Sri Lanka

0.29

Correlation Coefficient

Jat Holdings  Sri Lanka

Modest diversification

The 3 months correlation between Jat and Sri is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Jat Holdings PLC and Sri Lanka Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sri Lanka Telecom and Jat Holdings 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 Jat Holdings PLC are associated (or correlated) with Sri Lanka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sri Lanka Telecom has no effect on the direction of Jat Holdings i.e., Jat Holdings and Sri Lanka go up and down completely randomly.

Pair Corralation between Jat Holdings and Sri Lanka

Assuming the 90 days trading horizon Jat Holdings PLC is expected to generate 1.05 times more return on investment than Sri Lanka. However, Jat Holdings is 1.05 times more volatile than Sri Lanka Telecom. It trades about 0.07 of its potential returns per unit of risk. Sri Lanka Telecom is currently generating about -0.03 per unit of risk. If you would invest  1,800  in Jat Holdings PLC on September 26, 2024 and sell it today you would earn a total of  800.00  from holding Jat Holdings PLC or generate 44.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.67%
Values	Daily Returns

Jat Holdings PLC  vs.  Sri Lanka Telecom

Jat Holdings PLC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jat Holdings PLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jat Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Sri Lanka Telecom

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sri Lanka Telecom are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sri Lanka may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jat Holdings and Sri Lanka

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

The idea behind Jat Holdings PLC and Sri Lanka Telecom 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 Commodity Directory module to find actively traded commodities issued by global exchanges.