Correlation Between Trupanion and First American
Can any of the company-specific risk be diversified away by investing in both Trupanion and First American 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 Trupanion and First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trupanion and First American, you can compare the effects of market volatilities on Trupanion and First American 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 Trupanion with a short position of First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trupanion and First American.
Diversification Opportunities for Trupanion and First American
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Trupanion and First is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Trupanion and First American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American and Trupanion 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 Trupanion are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American has no effect on the direction of Trupanion i.e., Trupanion and First American go up and down completely randomly.
Pair Corralation between Trupanion and First American
Given the investment horizon of 90 days Trupanion is expected to under-perform the First American. In addition to that, Trupanion is 2.5 times more volatile than First American. It trades about -0.01 of its total potential returns per unit of risk. First American is currently generating about 0.34 per unit of volatility. If you would invest 6,401 in First American on August 28, 2024 and sell it today you would earn a total of 561.00 from holding First American or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trupanion vs. First American
Performance |
| Timeline |
| Trupanion |
| First American |
Trupanion and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trupanion and First American
The main advantage of trading using opposite Trupanion and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trupanion position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Trupanion vs. First American | Trupanion vs. Assurant | Trupanion vs. NMI Holdings | Trupanion vs. MGIC Investment Corp |
| First American vs. Fidelity National Financial | First American vs. Stewart Information Services | First American vs. Old Republic International | First American vs. American Financial Group |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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