Correlation Between Senkadagala Finance and SERENDIB HOTELS

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Can any of the company-specific risk be diversified away by investing in both Senkadagala Finance and SERENDIB HOTELS 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 Senkadagala Finance and SERENDIB HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Senkadagala Finance PLC and SERENDIB HOTELS PLC, you can compare the effects of market volatilities on Senkadagala Finance and SERENDIB HOTELS 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 Senkadagala Finance with a short position of SERENDIB HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Senkadagala Finance and SERENDIB HOTELS.

Diversification Opportunities for Senkadagala Finance and SERENDIB HOTELS

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Senkadagala and SERENDIB is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Senkadagala Finance PLC and SERENDIB HOTELS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERENDIB HOTELS PLC and Senkadagala Finance 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 Senkadagala Finance PLC are associated (or correlated) with SERENDIB HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERENDIB HOTELS PLC has no effect on the direction of Senkadagala Finance i.e., Senkadagala Finance and SERENDIB HOTELS go up and down completely randomly.

Pair Corralation between Senkadagala Finance and SERENDIB HOTELS

Assuming the 90 days trading horizon Senkadagala Finance is expected to generate 2.3 times less return on investment than SERENDIB HOTELS. But when comparing it to its historical volatility, Senkadagala Finance PLC is 2.14 times less risky than SERENDIB HOTELS. It trades about 0.2 of its potential returns per unit of risk. SERENDIB HOTELS PLC is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  840.00  in SERENDIB HOTELS PLC on September 17, 2024 and sell it today you would earn a total of  390.00  from holding SERENDIB HOTELS PLC or generate 46.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy40.0%
ValuesDaily Returns

Senkadagala Finance PLC  vs.  SERENDIB HOTELS PLC

 Performance 
       Timeline  
Senkadagala Finance PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Solid
Over the last 90 days Senkadagala Finance PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Senkadagala Finance sustained solid returns over the last few months and may actually be approaching a breakup point.
SERENDIB HOTELS PLC 

Risk-Adjusted Performance

17 of 100

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

Senkadagala Finance and SERENDIB HOTELS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Senkadagala Finance and SERENDIB HOTELS

The main advantage of trading using opposite Senkadagala Finance and SERENDIB HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Senkadagala Finance position performs unexpectedly, SERENDIB HOTELS 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 SERENDIB HOTELS will offset losses from the drop in SERENDIB HOTELS's long position.
The idea behind Senkadagala Finance PLC and SERENDIB HOTELS PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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