Correlation Between TPL Insurance and Hi Tech
Can any of the company-specific risk be diversified away by investing in both TPL Insurance and Hi Tech 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 TPL Insurance and Hi Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TPL Insurance and Hi Tech Lubricants, you can compare the effects of market volatilities on TPL Insurance and Hi Tech 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 TPL Insurance with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPL Insurance and Hi Tech.
Diversification Opportunities for TPL Insurance and Hi Tech
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between TPL and HTL is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants and TPL 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 TPL Insurance are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of TPL Insurance i.e., TPL Insurance and Hi Tech go up and down completely randomly.
Pair Corralation between TPL Insurance and Hi Tech
Assuming the 90 days trading horizon TPL Insurance is expected to under-perform the Hi Tech. But the stock apears to be less risky and, when comparing its historical volatility, TPL Insurance is 1.08 times less risky than Hi Tech. The stock trades about -0.08 of its potential returns per unit of risk. The Hi Tech Lubricants is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,561 in Hi Tech Lubricants on September 1, 2024 and sell it today you would earn a total of 1,100 from holding Hi Tech Lubricants or generate 30.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.75% |
| Values | Daily Returns |
TPL Insurance vs. Hi Tech Lubricants
Performance |
| Timeline |
| TPL Insurance |
| Hi Tech Lubricants |
TPL Insurance and Hi Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPL Insurance and Hi Tech
The main advantage of trading using opposite TPL Insurance and Hi Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPL Insurance position performs unexpectedly, Hi Tech 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 Hi Tech will offset losses from the drop in Hi Tech's long position.| TPL Insurance vs. Askari Bank | TPL Insurance vs. Adamjee Insurance | TPL Insurance vs. Reliance Insurance Co | TPL Insurance vs. Ghani Chemical Industries |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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