Correlation Between Hatton National and Janashakthi Insurance

Can any of the company-specific risk be diversified away by investing in both Hatton National and Janashakthi Insurance 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 Hatton National and Janashakthi Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hatton National Bank and Janashakthi Insurance, you can compare the effects of market volatilities on Hatton National and Janashakthi Insurance 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 Hatton National with a short position of Janashakthi Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hatton National and Janashakthi Insurance.

Diversification Opportunities for Hatton National and Janashakthi Insurance

0.32

Correlation Coefficient

Hatton National  Janashakthi Insurance

Weak diversification

The 3 months correlation between Hatton and Janashakthi is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hatton National Bank and Janashakthi Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janashakthi Insurance and Hatton National 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 Hatton National Bank are associated (or correlated) with Janashakthi Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janashakthi Insurance has no effect on the direction of Hatton National i.e., Hatton National and Janashakthi Insurance go up and down completely randomly.

Pair Corralation between Hatton National and Janashakthi Insurance

Assuming the 90 days trading horizon Hatton National Bank is expected to under-perform the Janashakthi Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Hatton National Bank is 1.32 times less risky than Janashakthi Insurance. The stock trades about -0.01 of its potential returns per unit of risk. The Janashakthi Insurance is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  5,520  in Janashakthi Insurance on December 28, 2024 and sell it today you would earn a total of  1,860  from holding Janashakthi Insurance or generate 33.7% return on investment over 90 days.

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

Hatton National Bank  vs.  Janashakthi Insurance

Hatton National Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hatton National Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hatton National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Janashakthi Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Janashakthi Insurance are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Janashakthi Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hatton National and Janashakthi Insurance

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

The idea behind Hatton National Bank and Janashakthi Insurance 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.