Correlation Between John Keells and Aitken Spence

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

By analyzing existing cross correlation between John Keells Hotels and Aitken Spence Hotel, you can compare the effects of market volatilities on John Keells and Aitken Spence 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 John Keells with a short position of Aitken Spence. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Keells and Aitken Spence.

Diversification Opportunities for John Keells and Aitken Spence

0.88

Correlation Coefficient

John Keells  Aitken Spence

Very poor diversification

The 3 months correlation between John and Aitken is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding John Keells Hotels and Aitken Spence Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aitken Spence Hotel and John Keells 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 John Keells Hotels are associated (or correlated) with Aitken Spence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aitken Spence Hotel has no effect on the direction of John Keells i.e., John Keells and Aitken Spence go up and down completely randomly.

Pair Corralation between John Keells and Aitken Spence

Assuming the 90 days trading horizon John Keells is expected to generate 1.23 times less return on investment than Aitken Spence. But when comparing it to its historical volatility, John Keells Hotels is 1.23 times less risky than Aitken Spence. It trades about 0.23 of its potential returns per unit of risk. Aitken Spence Hotel is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5,740  in Aitken Spence Hotel on September 16, 2024 and sell it today you would earn a total of  1,760  from holding Aitken Spence Hotel or generate 30.66% return on investment over 90 days.

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

John Keells Hotels  vs.  Aitken Spence Hotel

John Keells Hotels

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Keells Hotels are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, John Keells sustained solid returns over the last few months and may actually be approaching a breakup point.

Aitken Spence Hotel

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aitken Spence Hotel are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aitken Spence sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Keells and Aitken Spence

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

The idea behind John Keells Hotels and Aitken Spence Hotel 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.