Correlation Between Softlogic Life and Lanka Realty

Can any of the company-specific risk be diversified away by investing in both Softlogic Life and Lanka Realty 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 Softlogic Life and Lanka Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Softlogic Life Insurance and Lanka Realty Investments, you can compare the effects of market volatilities on Softlogic Life and Lanka Realty 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 Softlogic Life with a short position of Lanka Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Softlogic Life and Lanka Realty.

Diversification Opportunities for Softlogic Life and Lanka Realty

0.62

Correlation Coefficient

Softlogic Life  Lanka Realty

Poor diversification

The 3 months correlation between Softlogic and Lanka is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Softlogic Life Insurance and Lanka Realty Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanka Realty Investments and Softlogic Life 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 Softlogic Life Insurance are associated (or correlated) with Lanka Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanka Realty Investments has no effect on the direction of Softlogic Life i.e., Softlogic Life and Lanka Realty go up and down completely randomly.

Pair Corralation between Softlogic Life and Lanka Realty

Assuming the 90 days trading horizon Softlogic Life Insurance is expected to generate 0.67 times more return on investment than Lanka Realty. However, Softlogic Life Insurance is 1.5 times less risky than Lanka Realty. It trades about 0.01 of its potential returns per unit of risk. Lanka Realty Investments is currently generating about -0.06 per unit of risk. If you would invest  7,290  in Softlogic Life Insurance on December 26, 2024 and sell it today you would earn a total of  20.00  from holding Softlogic Life Insurance or generate 0.27% return on investment over 90 days.

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

Softlogic Life Insurance  vs.  Lanka Realty Investments

Softlogic Life Insurance

Risk-Adjusted Performance

Very Weak

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

Lanka Realty Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lanka Realty Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Softlogic Life and Lanka Realty

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

The idea behind Softlogic Life Insurance and Lanka Realty Investments 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.