Correlation Between Softlogic Life and Ceylon Cold

Can any of the company-specific risk be diversified away by investing in both Softlogic Life and Ceylon Cold 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 Ceylon Cold 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 Ceylon Cold Stores, you can compare the effects of market volatilities on Softlogic Life and Ceylon Cold 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 Ceylon Cold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Softlogic Life and Ceylon Cold.

Diversification Opportunities for Softlogic Life and Ceylon Cold

0.75

Correlation Coefficient

Softlogic Life  Ceylon Cold

Poor diversification

The 3 months correlation between Softlogic and Ceylon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Softlogic Life Insurance and Ceylon Cold Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Cold Stores 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 Ceylon Cold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Cold Stores has no effect on the direction of Softlogic Life i.e., Softlogic Life and Ceylon Cold go up and down completely randomly.

Pair Corralation between Softlogic Life and Ceylon Cold

Assuming the 90 days trading horizon Softlogic Life is expected to generate 3.93 times less return on investment than Ceylon Cold. In addition to that, Softlogic Life is 1.08 times more volatile than Ceylon Cold Stores. It trades about 0.06 of its total potential returns per unit of risk. Ceylon Cold Stores is currently generating about 0.25 per unit of volatility. If you would invest  5,250  in Ceylon Cold Stores on September 17, 2024 and sell it today you would earn a total of  1,450  from holding Ceylon Cold Stores or generate 27.62% 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.  Ceylon Cold Stores

Softlogic Life Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Softlogic Life Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Softlogic Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ceylon Cold Stores

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Cold Stores are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Cold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Softlogic Life and Ceylon Cold

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

The idea behind Softlogic Life Insurance and Ceylon Cold Stores 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..