Correlation Between Prime Lands and John Keells

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

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

Diversification Opportunities for Prime Lands and John Keells

0.86

Correlation Coefficient

Prime Lands  John Keells

Very poor diversification

The 3 months correlation between Prime and John is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Prime Lands Residencies and John Keells Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Keells Hotels and Prime Lands 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 Prime Lands Residencies are associated (or correlated) with John Keells. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Keells Hotels has no effect on the direction of Prime Lands i.e., Prime Lands and John Keells go up and down completely randomly.

Pair Corralation between Prime Lands and John Keells

Assuming the 90 days trading horizon Prime Lands Residencies is expected to generate 1.44 times more return on investment than John Keells. However, Prime Lands is 1.44 times more volatile than John Keells Hotels. It trades about 0.23 of its potential returns per unit of risk. John Keells Hotels is currently generating about 0.23 per unit of risk. If you would invest  810.00  in Prime Lands Residencies on September 17, 2024 and sell it today you would earn a total of  290.00  from holding Prime Lands Residencies or generate 35.8% return on investment over 90 days.

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

Prime Lands Residencies  vs.  John Keells Hotels

Prime Lands Residencies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Lands Residencies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prime Lands sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Prime Lands and John Keells

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

The idea behind Prime Lands Residencies and John Keells Hotels 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.