Correlation Between JS Investments and TPL Insurance

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

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

Diversification Opportunities for JS Investments and TPL Insurance

0.11

Correlation Coefficient

JS Investments  TPL Insurance

Average diversification

The 3 months correlation between JSIL and TPL is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance and JS Investments 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 JS Investments 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 JS Investments i.e., JS Investments and TPL Insurance go up and down completely randomly.

Pair Corralation between JS Investments and TPL Insurance

Assuming the 90 days trading horizon JS Investments is expected to generate 1.26 times more return on investment than TPL Insurance. However, JS Investments is 1.26 times more volatile than TPL Insurance. It trades about 0.07 of its potential returns per unit of risk. TPL Insurance is currently generating about 0.07 per unit of risk. If you would invest  2,212  in JS Investments on September 15, 2024 and sell it today you would earn a total of  255.00  from holding JS Investments or generate 11.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

JS Investments  vs.  TPL Insurance

JS Investments

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

TPL Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TPL Insurance are ranked lower than 5 (%) 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 JS Investments and TPL Insurance

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

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.