Correlation Between Lanka Credit and Sri Lanka

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

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

Diversification Opportunities for Lanka Credit and Sri Lanka

0.5

Correlation Coefficient

Lanka Credit  Sri Lanka

Very weak diversification

The 3 months correlation between Lanka and Sri is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lanka Credit and 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 Lanka Credit 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 Lanka Credit and 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 Lanka Credit i.e., Lanka Credit and Sri Lanka go up and down completely randomly.

Pair Corralation between Lanka Credit and Sri Lanka

Assuming the 90 days trading horizon Lanka Credit and is expected to generate 1.53 times more return on investment than Sri Lanka. However, Lanka Credit is 1.53 times more volatile than Sri Lanka Telecom. It trades about 0.14 of its potential returns per unit of risk. Sri Lanka Telecom is currently generating about 0.14 per unit of risk. If you would invest  200.00  in Lanka Credit and on September 16, 2024 and sell it today you would earn a total of  60.00  from holding Lanka Credit and or generate 30.0% return on investment over 90 days.

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

Lanka Credit and  vs.  Sri Lanka Telecom

Lanka Credit

Risk-Adjusted Performance

10 of 100

OK

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

Sri Lanka Telecom

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Lanka Credit and Sri Lanka

The main advantage of trading using opposite Lanka Credit and Sri Lanka positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lanka Credit 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 Lanka Credit and 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.