Correlation Between Tiptree and Lancashire Holdings

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

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

Diversification Opportunities for Tiptree and Lancashire Holdings

-0.78

Correlation Coefficient

Tiptree  Lancashire Holdings

Pay attention - limited upside

The 3 months correlation between Tiptree and Lancashire is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tiptree and Lancashire Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings and Tiptree 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 Tiptree are associated (or correlated) with Lancashire Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancashire Holdings has no effect on the direction of Tiptree i.e., Tiptree and Lancashire Holdings go up and down completely randomly.

Pair Corralation between Tiptree and Lancashire Holdings

Given the investment horizon of 90 days Tiptree is expected to generate 4.09 times less return on investment than Lancashire Holdings. But when comparing it to its historical volatility, Tiptree is 4.26 times less risky than Lancashire Holdings. It trades about 0.05 of its potential returns per unit of risk. Lancashire Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  725.00  in Lancashire Holdings on September 30, 2024 and sell it today you would earn a total of  106.00  from holding Lancashire Holdings or generate 14.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	72.43%
Values	Daily Returns

Tiptree  vs.  Lancashire Holdings

Tiptree

Risk-Adjusted Performance

5 of 100

Modest

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

Lancashire Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tiptree and Lancashire Holdings

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

The idea behind Tiptree and Lancashire 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.