Correlation Between Janashakthi Insurance and Mahaweli Coconut

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

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

Diversification Opportunities for Janashakthi Insurance and Mahaweli Coconut

0.84

Correlation Coefficient

Janashakthi Insurance  Mahaweli Coconut

Very poor diversification

The 3 months correlation between Janashakthi and Mahaweli is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Janashakthi Insurance and Mahaweli Coconut Plantations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahaweli Coconut Pla and Janashakthi Insurance 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 Janashakthi Insurance are associated (or correlated) with Mahaweli Coconut. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahaweli Coconut Pla has no effect on the direction of Janashakthi Insurance i.e., Janashakthi Insurance and Mahaweli Coconut go up and down completely randomly.

Pair Corralation between Janashakthi Insurance and Mahaweli Coconut

Assuming the 90 days trading horizon Janashakthi Insurance is expected to generate 1.26 times more return on investment than Mahaweli Coconut. However, Janashakthi Insurance is 1.26 times more volatile than Mahaweli Coconut Plantations. It trades about 0.06 of its potential returns per unit of risk. Mahaweli Coconut Plantations is currently generating about 0.02 per unit of risk. If you would invest  2,710  in Janashakthi Insurance on September 18, 2024 and sell it today you would earn a total of  2,400  from holding Janashakthi Insurance or generate 88.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	91.67%
Values	Daily Returns

Janashakthi Insurance  vs.  Mahaweli Coconut Plantations

Janashakthi Insurance

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Janashakthi Insurance are ranked lower than 18 (%) 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.

Mahaweli Coconut Pla

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mahaweli Coconut Plantations are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mahaweli Coconut sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Janashakthi Insurance and Mahaweli Coconut

The main advantage of trading using opposite Janashakthi Insurance and Mahaweli Coconut positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Janashakthi Insurance position performs unexpectedly, Mahaweli Coconut 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 Mahaweli Coconut will offset losses from the drop in Mahaweli Coconut's long position.

The idea behind Janashakthi Insurance and Mahaweli Coconut Plantations 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.