Correlation Between ACL Plastics and Sri Lanka

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

Diversification Opportunities for ACL Plastics and Sri Lanka

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ACL and Sri is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ACL Plastics PLC 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 ACL Plastics 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 ACL Plastics PLC 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 ACL Plastics i.e., ACL Plastics and Sri Lanka go up and down completely randomly.

Pair Corralation between ACL Plastics and Sri Lanka

Assuming the 90 days trading horizon ACL Plastics PLC is expected to generate 0.79 times more return on investment than Sri Lanka. However, ACL Plastics PLC is 1.26 times less risky than Sri Lanka. It trades about 0.02 of its potential returns per unit of risk. Sri Lanka Telecom is currently generating about 0.01 per unit of risk. If you would invest  43,050  in ACL Plastics PLC on August 30, 2024 and sell it today you would earn a total of  3,000  from holding ACL Plastics PLC or generate 6.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.32%
ValuesDaily Returns

ACL Plastics PLC  vs.  Sri Lanka Telecom

 Performance 
       Timeline  
ACL Plastics PLC 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ACL Plastics PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ACL Plastics sustained solid returns over the last few months and may actually be approaching a breakup point.
Sri Lanka Telecom 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Sri Lanka Telecom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sri Lanka is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ACL Plastics and Sri Lanka Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ACL Plastics and Sri Lanka

The main advantage of trading using opposite ACL Plastics and Sri Lanka positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACL Plastics 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.
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The idea behind ACL Plastics PLC 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.
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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