Correlation Between Big Bird and TPL Insurance

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

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

Diversification Opportunities for Big Bird and TPL Insurance

-0.64

Correlation Coefficient

Big Bird  TPL Insurance

Excellent diversification

The 3 months correlation between Big and TPL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance and Big Bird 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 Big Bird Foods 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 Big Bird i.e., Big Bird and TPL Insurance go up and down completely randomly.

Pair Corralation between Big Bird and TPL Insurance

Assuming the 90 days trading horizon Big Bird Foods is expected to under-perform the TPL Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Big Bird Foods is 1.02 times less risky than TPL Insurance. The stock trades about -0.18 of its potential returns per unit of risk. The TPL Insurance is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in TPL Insurance on September 27, 2024 and sell it today you would earn a total of  154.00  from holding TPL Insurance or generate 15.4% return on investment over 90 days.

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

Big Bird Foods  vs.  TPL Insurance

Big Bird Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Bird Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TPL Insurance

Risk-Adjusted Performance

6 of 100

OK

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

Pair Trading with Big Bird and TPL Insurance

The main advantage of trading using opposite Big Bird and TPL Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Bird 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.

The idea behind Big Bird Foods and TPL Insurance 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.