Correlation Between Sampath Bank and Janashakthi Insurance

Can any of the company-specific risk be diversified away by investing in both Sampath Bank 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 Sampath Bank and Janashakthi Insurance 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 Janashakthi Insurance, you can compare the effects of market volatilities on Sampath Bank 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 Sampath Bank with a short position of Janashakthi Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sampath Bank and Janashakthi Insurance.

Diversification Opportunities for Sampath Bank and Janashakthi Insurance

0.92

Correlation Coefficient

Sampath Bank  Janashakthi Insurance

Almost no diversification

The 3 months correlation between Sampath and Janashakthi is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sampath Bank PLC and Janashakthi Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janashakthi 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 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 Sampath Bank i.e., Sampath Bank and Janashakthi Insurance go up and down completely randomly.

Pair Corralation between Sampath Bank and Janashakthi Insurance

Assuming the 90 days trading horizon Sampath Bank PLC is expected to generate 0.61 times more return on investment than Janashakthi Insurance. However, Sampath Bank PLC is 1.63 times less risky than Janashakthi Insurance. It trades about 0.48 of its potential returns per unit of risk. Janashakthi Insurance is currently generating about 0.22 per unit of risk. If you would invest  7,230  in Sampath Bank PLC on September 14, 2024 and sell it today you would earn a total of  3,270  from holding Sampath Bank PLC or generate 45.23% return on investment over 90 days.

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

Sampath Bank PLC  vs.  Janashakthi Insurance

Sampath Bank PLC

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sampath Bank PLC are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sampath Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Janashakthi Insurance

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Janashakthi Insurance are ranked lower than 17 (%) 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 Sampath Bank and Janashakthi Insurance

The main advantage of trading using opposite Sampath Bank and Janashakthi Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sampath Bank 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 Sampath Bank PLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.