Correlation Between Lanka Milk and SWARNAMAHAL FINANCIAL

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

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

Diversification Opportunities for Lanka Milk and SWARNAMAHAL FINANCIAL

0.0

Correlation Coefficient

Lanka Milk  SWARNAMAHAL FINANCIAL

Pay attention - limited upside

The 3 months correlation between Lanka and SWARNAMAHAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lanka Milk Foods and SWARNAMAHAL FINANCIAL SERVICES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWARNAMAHAL FINANCIAL and Lanka Milk 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 Milk Foods are associated (or correlated) with SWARNAMAHAL FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWARNAMAHAL FINANCIAL has no effect on the direction of Lanka Milk i.e., Lanka Milk and SWARNAMAHAL FINANCIAL go up and down completely randomly.

Pair Corralation between Lanka Milk and SWARNAMAHAL FINANCIAL

If you would invest  2,600  in Lanka Milk Foods on September 19, 2024 and sell it today you would earn a total of  1,200  from holding Lanka Milk Foods or generate 46.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lanka Milk Foods  vs.  SWARNAMAHAL FINANCIAL SERVICES

Lanka Milk Foods

Risk-Adjusted Performance

22 of 100

Solid

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

SWARNAMAHAL FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SWARNAMAHAL FINANCIAL SERVICES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SWARNAMAHAL FINANCIAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lanka Milk and SWARNAMAHAL FINANCIAL

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

The idea behind Lanka Milk Foods and SWARNAMAHAL FINANCIAL SERVICES 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.