Correlation Between Pan Asia and Softlogic Life

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

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

Diversification Opportunities for Pan Asia and Softlogic Life

0.79

Correlation Coefficient

Pan Asia  Softlogic Life

Poor diversification

The 3 months correlation between Pan and Softlogic is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Banking 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 Pan Asia 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 Pan Asia Banking 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 Pan Asia i.e., Pan Asia and Softlogic Life go up and down completely randomly.

Pair Corralation between Pan Asia and Softlogic Life

Assuming the 90 days trading horizon Pan Asia Banking is expected to generate 0.87 times more return on investment than Softlogic Life. However, Pan Asia Banking is 1.15 times less risky than Softlogic Life. It trades about 0.58 of its potential returns per unit of risk. Softlogic Life Insurance is currently generating about 0.35 per unit of risk. If you would invest  2,800  in Pan Asia Banking on October 7, 2024 and sell it today you would earn a total of  960.00  from holding Pan Asia Banking or generate 34.29% return on investment over 90 days.

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

Pan Asia Banking  vs.  Softlogic Life Insurance

Pan Asia Banking

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Asia Banking are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pan Asia sustained solid returns over the last few months and may actually be approaching a breakup point.

Softlogic Life Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Softlogic Life Insurance are ranked lower than 12 (%) 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.

Pair Trading with Pan Asia and Softlogic Life

The main advantage of trading using opposite Pan Asia and Softlogic Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan Asia 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 Pan Asia Banking 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.