Correlation Between Crescent Star and TPL Insurance

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

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

Diversification Opportunities for Crescent Star and TPL Insurance

0.71

Correlation Coefficient

Crescent Star  TPL Insurance

Poor diversification

The 3 months correlation between Crescent and TPL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Star Insurance and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance and Crescent Star 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 Crescent Star 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 Crescent Star i.e., Crescent Star and TPL Insurance go up and down completely randomly.

Pair Corralation between Crescent Star and TPL Insurance

Assuming the 90 days trading horizon Crescent Star is expected to generate 1.31 times less return on investment than TPL Insurance. In addition to that, Crescent Star is 1.36 times more volatile than TPL Insurance. It trades about 0.14 of its total potential returns per unit of risk. TPL Insurance is currently generating about 0.25 per unit of volatility. If you would invest  925.00  in TPL Insurance on September 17, 2024 and sell it today you would earn a total of  145.00  from holding TPL Insurance or generate 15.68% return on investment over 90 days.

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

Crescent Star Insurance  vs.  TPL Insurance

Crescent Star Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crescent Star Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crescent Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TPL Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TPL Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TPL Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Crescent Star and TPL Insurance

The main advantage of trading using opposite Crescent Star and TPL Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Star 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 Crescent Star Insurance 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.