Correlation Between Sampath Bank and Softlogic Life

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

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

Diversification Opportunities for Sampath Bank and Softlogic Life

0.63

Correlation Coefficient

Sampath Bank  Softlogic Life

Poor diversification

The 3 months correlation between Sampath and Softlogic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sampath Bank PLC 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 Sampath Bank 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 Sampath Bank PLC 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 Sampath Bank i.e., Sampath Bank and Softlogic Life go up and down completely randomly.

Pair Corralation between Sampath Bank and Softlogic Life

Assuming the 90 days trading horizon Sampath Bank is expected to generate 1.51 times less return on investment than Softlogic Life. But when comparing it to its historical volatility, Sampath Bank PLC is 1.62 times less risky than Softlogic Life. It trades about 0.04 of its potential returns per unit of risk. Softlogic Life Insurance is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,020  in Softlogic Life Insurance on December 28, 2024 and sell it today you would earn a total of  290.00  from holding Softlogic Life Insurance or generate 4.13% return on investment over 90 days.

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

Sampath Bank PLC  vs.  Softlogic Life Insurance

Sampath Bank PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sampath Bank PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sampath Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Softlogic Life Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Softlogic Life Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Softlogic Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sampath Bank and Softlogic Life

The main advantage of trading using opposite Sampath Bank and Softlogic Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sampath Bank 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 Sampath Bank PLC 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.