Correlation Between Keells Food and Union Bank

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

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

Diversification Opportunities for Keells Food and Union Bank

0.24

Correlation Coefficient

Keells Food  Union Bank

Modest diversification

The 3 months correlation between Keells and Union is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Keells Food Products and Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank and Keells Food 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 Keells Food Products are associated (or correlated) with Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of Keells Food i.e., Keells Food and Union Bank go up and down completely randomly.

Pair Corralation between Keells Food and Union Bank

Assuming the 90 days trading horizon Keells Food is expected to generate 1.73 times less return on investment than Union Bank. In addition to that, Keells Food is 1.01 times more volatile than Union Bank. It trades about 0.08 of its total potential returns per unit of risk. Union Bank is currently generating about 0.14 per unit of volatility. If you would invest  920.00  in Union Bank on September 24, 2024 and sell it today you would earn a total of  130.00  from holding Union Bank or generate 14.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.33%
Values	Daily Returns

Keells Food Products  vs.  Union Bank

Keells Food Products

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Keells Food Products are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keells Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Union Bank

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Keells Food and Union Bank

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

The idea behind Keells Food Products and Union Bank 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.