Correlation Between Softlogic Life and Madulsima Plantations

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

Diversification Opportunities for Softlogic Life and Madulsima Plantations

0.62

Correlation Coefficient

Softlogic Life  Madulsima Plantations

Poor diversification

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

Pair Corralation between Softlogic Life and Madulsima Plantations

Assuming the 90 days trading horizon Softlogic Life is expected to generate 1.17 times less return on investment than Madulsima Plantations. But when comparing it to its historical volatility, Softlogic Life Insurance is 1.49 times less risky than Madulsima Plantations. It trades about 0.12 of its potential returns per unit of risk. Madulsima Plantations PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,190  in Madulsima Plantations PLC on October 25, 2024 and sell it today you would earn a total of  220.00  from holding Madulsima Plantations PLC or generate 18.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Softlogic Life Insurance  vs.  Madulsima Plantations PLC

Softlogic Life Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Softlogic Life Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Softlogic Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Madulsima Plantations PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Madulsima Plantations PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Madulsima Plantations sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Softlogic Life and Madulsima Plantations

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

The idea behind Softlogic Life Insurance and Madulsima Plantations 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.