Correlation Between DB Insurance and TL

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

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

Diversification Opportunities for DB Insurance and TL

-0.5

Correlation Coefficient

DB Insurance  TL

Very good diversification

The 3 months correlation between 005830 and TL is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding DB Insurance Co and TL Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TL Co and DB 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 DB Insurance Co are associated (or correlated) with TL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TL Co has no effect on the direction of DB Insurance i.e., DB Insurance and TL go up and down completely randomly.

Pair Corralation between DB Insurance and TL

Assuming the 90 days trading horizon DB Insurance Co is expected to under-perform the TL. But the stock apears to be less risky and, when comparing its historical volatility, DB Insurance Co is 1.66 times less risky than TL. The stock trades about -0.06 of its potential returns per unit of risk. The TL Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,690,000  in TL Co on December 30, 2024 and sell it today you would earn a total of  990,000  from holding TL Co or generate 14.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

DB Insurance Co  vs.  TL Co

DB Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days DB Insurance Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

TL Co

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TL Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DB Insurance and TL

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

The idea behind DB Insurance Co and TL Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.