Correlation Between Tal Lanka and Janashakthi Insurance

Can any of the company-specific risk be diversified away by investing in both Tal Lanka 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 Tal Lanka and Janashakthi Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Tal Lanka and Janashakthi Insurance

0.7

Correlation Coefficient

Tal Lanka  Janashakthi Insurance

Poor diversification

The 3 months correlation between Tal and Janashakthi is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tal Lanka Hotels and Janashakthi Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janashakthi Insurance and Tal Lanka 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 Tal Lanka Hotels 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 Tal Lanka i.e., Tal Lanka and Janashakthi Insurance go up and down completely randomly.

Pair Corralation between Tal Lanka and Janashakthi Insurance

Assuming the 90 days trading horizon Tal Lanka is expected to generate 1.8 times less return on investment than Janashakthi Insurance. In addition to that, Tal Lanka is 1.38 times more volatile than Janashakthi Insurance. It trades about 0.09 of its total potential returns per unit of risk. Janashakthi Insurance is currently generating about 0.23 per unit of volatility. If you would invest  3,730  in Janashakthi Insurance on December 5, 2024 and sell it today you would earn a total of  2,740  from holding Janashakthi Insurance or generate 73.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.41%
Values	Daily Returns

Tal Lanka Hotels  vs.  Janashakthi Insurance

Tal Lanka Hotels

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tal Lanka Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tal Lanka is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Janashakthi Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Janashakthi Insurance are ranked lower than 16 (%) 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 Tal Lanka and Janashakthi Insurance

The main advantage of trading using opposite Tal Lanka and Janashakthi Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tal Lanka 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 Tal Lanka Hotels 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.