Correlation Between Dolphin Hotels and Softlogic Life

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

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

Diversification Opportunities for Dolphin Hotels and Softlogic Life

0.51

Correlation Coefficient

Dolphin Hotels  Softlogic Life

Very weak diversification

The 3 months correlation between Dolphin and Softlogic is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dolphin Hotels 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 Dolphin Hotels 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 Dolphin Hotels 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 Dolphin Hotels i.e., Dolphin Hotels and Softlogic Life go up and down completely randomly.

Pair Corralation between Dolphin Hotels and Softlogic Life

Assuming the 90 days trading horizon Dolphin Hotels PLC is expected to generate 0.97 times more return on investment than Softlogic Life. However, Dolphin Hotels PLC is 1.03 times less risky than Softlogic Life. It trades about 0.06 of its potential returns per unit of risk. Softlogic Life Insurance is currently generating about 0.0 per unit of risk. If you would invest  3,160  in Dolphin Hotels PLC on September 16, 2024 and sell it today you would earn a total of  2,140  from holding Dolphin Hotels PLC or generate 67.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.58%
Values	Daily Returns

Dolphin Hotels PLC  vs.  Softlogic Life Insurance

Dolphin Hotels PLC

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dolphin Hotels PLC are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dolphin Hotels 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 Dolphin Hotels and Softlogic Life

The main advantage of trading using opposite Dolphin Hotels and Softlogic Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dolphin Hotels 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 Dolphin Hotels 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.