Correlation Between Sanasa Development and Lanka Credit

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

Diversification Opportunities for Sanasa Development and Lanka Credit

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sanasa and Lanka is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sanasa Development Bank and Lanka Credit and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanka Credit and Sanasa Development 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 Sanasa Development Bank are associated (or correlated) with Lanka Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanka Credit has no effect on the direction of Sanasa Development i.e., Sanasa Development and Lanka Credit go up and down completely randomly.

Pair Corralation between Sanasa Development and Lanka Credit

Assuming the 90 days trading horizon Sanasa Development Bank is expected to generate 0.47 times more return on investment than Lanka Credit. However, Sanasa Development Bank is 2.11 times less risky than Lanka Credit. It trades about 0.02 of its potential returns per unit of risk. Lanka Credit and is currently generating about 0.0 per unit of risk. If you would invest  3,200  in Sanasa Development Bank on September 3, 2024 and sell it today you would earn a total of  100.00  from holding Sanasa Development Bank or generate 3.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.0%
ValuesDaily Returns

Sanasa Development Bank  vs.  Lanka Credit and

 Performance 
       Timeline  
Sanasa Development Bank 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sanasa Development Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sanasa Development may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Lanka Credit 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Lanka Credit and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lanka Credit sustained solid returns over the last few months and may actually be approaching a breakup point.

Sanasa Development and Lanka Credit Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sanasa Development and Lanka Credit

The main advantage of trading using opposite Sanasa Development and Lanka Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanasa Development position performs unexpectedly, Lanka Credit 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 Lanka Credit will offset losses from the drop in Lanka Credit's long position.
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The idea behind Sanasa Development Bank and Lanka Credit and 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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