Correlation Between Peoples Insurance and Tokio Marine

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

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

Diversification Opportunities for Peoples Insurance and Tokio Marine

0.47

Correlation Coefficient

Peoples Insurance  Tokio Marine

Very weak diversification

The 3 months correlation between Peoples and Tokio is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding The Peoples Insurance and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings and Peoples 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 The Peoples Insurance are associated (or correlated) with Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of Peoples Insurance i.e., Peoples Insurance and Tokio Marine go up and down completely randomly.

Pair Corralation between Peoples Insurance and Tokio Marine

Assuming the 90 days horizon The Peoples Insurance is expected to generate 2.54 times more return on investment than Tokio Marine. However, Peoples Insurance is 2.54 times more volatile than Tokio Marine Holdings. It trades about 0.06 of its potential returns per unit of risk. Tokio Marine Holdings is currently generating about 0.02 per unit of risk. If you would invest  41.00  in The Peoples Insurance on October 5, 2024 and sell it today you would earn a total of  5.00  from holding The Peoples Insurance or generate 12.2% return on investment over 90 days.

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

The Peoples Insurance  vs.  Tokio Marine Holdings

Peoples Insurance

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days The Peoples Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Peoples Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Tokio Marine Holdings

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Tokio Marine Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tokio Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Peoples Insurance and Tokio Marine

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

The idea behind The Peoples Insurance and Tokio Marine Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.