Correlation Between E M and SEYLAN BANK

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

Diversification Opportunities for E M and SEYLAN BANK

0.77
  Correlation Coefficient
 E M

Poor diversification

The 3 months correlation between EMLN0000 and SEYLAN is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding E M L and SEYLAN BANK PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEYLAN BANK PLC and E M 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 E M L are associated (or correlated) with SEYLAN BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEYLAN BANK PLC has no effect on the direction of E M i.e., E M and SEYLAN BANK go up and down completely randomly.

Pair Corralation between E M and SEYLAN BANK

Assuming the 90 days trading horizon E M L is expected to under-perform the SEYLAN BANK. In addition to that, E M is 1.11 times more volatile than SEYLAN BANK PLC. It trades about 0.0 of its total potential returns per unit of risk. SEYLAN BANK PLC is currently generating about 0.09 per unit of volatility. If you would invest  1,630  in SEYLAN BANK PLC on September 3, 2024 and sell it today you would earn a total of  2,710  from holding SEYLAN BANK PLC or generate 166.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.37%
ValuesDaily Returns

E M L  vs.  SEYLAN BANK PLC

 Performance 
       Timeline  
E M L 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.
SEYLAN BANK PLC 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in SEYLAN BANK PLC are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SEYLAN BANK sustained solid returns over the last few months and may actually be approaching a breakup point.

E M and SEYLAN BANK Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with E M and SEYLAN BANK

The main advantage of trading using opposite E M and SEYLAN BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E M position performs unexpectedly, SEYLAN BANK 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 SEYLAN BANK will offset losses from the drop in SEYLAN BANK's long position.
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The idea behind E M L and SEYLAN BANK 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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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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