Correlation Between Premier Insurance and TPL Insurance
Can any of the company-specific risk be diversified away by investing in both Premier Insurance and TPL 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 Premier Insurance and TPL Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Insurance and TPL Insurance, you can compare the effects of market volatilities on Premier Insurance and TPL 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 Premier Insurance with a short position of TPL Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Insurance and TPL Insurance.
Diversification Opportunities for Premier Insurance and TPL Insurance
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Premier and TPL is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance and Premier 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 Premier Insurance are associated (or correlated) with TPL Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPL Insurance has no effect on the direction of Premier Insurance i.e., Premier Insurance and TPL Insurance go up and down completely randomly.
Pair Corralation between Premier Insurance and TPL Insurance
Assuming the 90 days trading horizon Premier Insurance is expected to generate 2.21 times more return on investment than TPL Insurance. However, Premier Insurance is 2.21 times more volatile than TPL Insurance. It trades about 0.03 of its potential returns per unit of risk. TPL Insurance is currently generating about -0.03 per unit of risk. If you would invest 611.00 in Premier Insurance on November 19, 2024 and sell it today you would lose (34.00) from holding Premier Insurance or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.71% |
| Values | Daily Returns |
Premier Insurance vs. TPL Insurance
Performance |
| Timeline |
| Premier Insurance |
| TPL Insurance |
Premier Insurance and TPL Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Insurance and TPL Insurance
The main advantage of trading using opposite Premier Insurance and TPL Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Insurance position performs unexpectedly, TPL 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 TPL Insurance will offset losses from the drop in TPL Insurance's long position.| Premier Insurance vs. Masood Textile Mills | Premier Insurance vs. Fauji Foods | Premier Insurance vs. KSB Pumps | Premier Insurance vs. Mari Petroleum |
| TPL Insurance vs. Synthetic Products Enterprises | TPL Insurance vs. Wah Nobel Chemicals | TPL Insurance vs. Air Link Communication | TPL Insurance vs. JS Bank |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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