Correlation Between Prime Lands and Sigiriya Village

Can any of the company-specific risk be diversified away by investing in both Prime Lands and Sigiriya Village 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 Sigiriya Village 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 Sigiriya Village Hotels, you can compare the effects of market volatilities on Prime Lands and Sigiriya Village 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 Sigiriya Village. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Lands and Sigiriya Village.

Diversification Opportunities for Prime Lands and Sigiriya Village

0.92

Correlation Coefficient

Prime Lands  Sigiriya Village

Almost no diversification

The 3 months correlation between Prime and Sigiriya is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Prime Lands Residencies and Sigiriya Village Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigiriya Village 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 Sigiriya Village. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigiriya Village Hotels has no effect on the direction of Prime Lands i.e., Prime Lands and Sigiriya Village go up and down completely randomly.

Pair Corralation between Prime Lands and Sigiriya Village

Assuming the 90 days trading horizon Prime Lands is expected to generate 2.62 times less return on investment than Sigiriya Village. But when comparing it to its historical volatility, Prime Lands Residencies is 1.58 times less risky than Sigiriya Village. It trades about 0.24 of its potential returns per unit of risk. Sigiriya Village Hotels is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  3,520  in Sigiriya Village Hotels on September 28, 2024 and sell it today you would earn a total of  5,080  from holding Sigiriya Village Hotels or generate 144.32% return on investment over 90 days.

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

Prime Lands Residencies  vs.  Sigiriya Village Hotels

Prime Lands Residencies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Lands Residencies are ranked lower than 19 (%) 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.

Sigiriya Village Hotels

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sigiriya Village Hotels are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sigiriya Village sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prime Lands and Sigiriya Village

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

The idea behind Prime Lands Residencies and Sigiriya Village 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.