Correlation Between General Insurance and TPL Plastech

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

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

Diversification Opportunities for General Insurance and TPL Plastech

0.64

Correlation Coefficient

General Insurance  TPL Plastech

Poor diversification

The 3 months correlation between General and TPL is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and TPL Plastech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Plastech Limited and General 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 General Insurance are associated (or correlated) with TPL Plastech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPL Plastech Limited has no effect on the direction of General Insurance i.e., General Insurance and TPL Plastech go up and down completely randomly.

Pair Corralation between General Insurance and TPL Plastech

Assuming the 90 days trading horizon General Insurance is expected to generate 1.02 times more return on investment than TPL Plastech. However, General Insurance is 1.02 times more volatile than TPL Plastech Limited. It trades about 0.07 of its potential returns per unit of risk. TPL Plastech Limited is currently generating about 0.02 per unit of risk. If you would invest  39,290  in General Insurance on September 12, 2024 and sell it today you would earn a total of  3,305  from holding General Insurance or generate 8.41% return on investment over 90 days.

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

General Insurance  vs.  TPL Plastech Limited

General Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, General Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TPL Plastech Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TPL Plastech Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, TPL Plastech is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with General Insurance and TPL Plastech

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

The idea behind General Insurance and TPL Plastech Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.