Correlation Between John Keells and Softlogic Life

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

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

Diversification Opportunities for John Keells and Softlogic Life

0.73

Correlation Coefficient

John Keells  Softlogic Life

Poor diversification

The 3 months correlation between John and Softlogic is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding John Keells Hotels and Softlogic Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softlogic Life Insurance and John Keells 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 John Keells Hotels are associated (or correlated) with Softlogic Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softlogic Life Insurance has no effect on the direction of John Keells i.e., John Keells and Softlogic Life go up and down completely randomly.

Pair Corralation between John Keells and Softlogic Life

Assuming the 90 days trading horizon John Keells Hotels is expected to generate 0.9 times more return on investment than Softlogic Life. However, John Keells Hotels is 1.11 times less risky than Softlogic Life. It trades about 0.23 of its potential returns per unit of risk. Softlogic Life Insurance is currently generating about 0.06 per unit of risk. If you would invest  1,510  in John Keells Hotels on September 16, 2024 and sell it today you would earn a total of  370.00  from holding John Keells Hotels or generate 24.5% return on investment over 90 days.

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

John Keells Hotels  vs.  Softlogic Life Insurance

John Keells Hotels

Risk-Adjusted Performance

18 of 100

Solid

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

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.

Pair Trading with John Keells and Softlogic Life

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

The idea behind John Keells Hotels and Softlogic Life 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..