Correlation Between Shifa International and TPL Insurance

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

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

Diversification Opportunities for Shifa International and TPL Insurance

-0.76

Correlation Coefficient

Shifa International  TPL Insurance

Pay attention - limited upside

The 3 months correlation between Shifa and TPL is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shifa International Hospitals and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance and Shifa International 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 Shifa International Hospitals 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 Shifa International i.e., Shifa International and TPL Insurance go up and down completely randomly.

Pair Corralation between Shifa International and TPL Insurance

Assuming the 90 days trading horizon Shifa International Hospitals is expected to generate 1.03 times more return on investment than TPL Insurance. However, Shifa International is 1.03 times more volatile than TPL Insurance. It trades about 0.15 of its potential returns per unit of risk. TPL Insurance is currently generating about -0.13 per unit of risk. If you would invest  39,018  in Shifa International Hospitals on December 29, 2024 and sell it today you would earn a total of  8,986  from holding Shifa International Hospitals or generate 23.03% return on investment over 90 days.

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

Shifa International Hospitals  vs.  TPL Insurance

Shifa International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

TPL Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days TPL Insurance 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shifa International and TPL Insurance

The main advantage of trading using opposite Shifa International and TPL Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shifa International 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 Shifa International Hospitals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.