Correlation Between TRI Pointe and Donegal Group

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

By analyzing existing cross correlation between TRI Pointe Homes and Donegal Group B, you can compare the effects of market volatilities on TRI Pointe and Donegal Group 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 TRI Pointe with a short position of Donegal Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRI Pointe and Donegal Group.

Diversification Opportunities for TRI Pointe and Donegal Group

-0.49

Correlation Coefficient

TRI Pointe  Donegal Group

Very good diversification

The 3 months correlation between TRI and Donegal is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding TRI Pointe Homes and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B and TRI Pointe 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 TRI Pointe Homes are associated (or correlated) with Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of TRI Pointe i.e., TRI Pointe and Donegal Group go up and down completely randomly.

Pair Corralation between TRI Pointe and Donegal Group

Considering the 90-day investment horizon TRI Pointe Homes is expected to generate 0.59 times more return on investment than Donegal Group. However, TRI Pointe Homes is 1.68 times less risky than Donegal Group. It trades about 0.06 of its potential returns per unit of risk. Donegal Group B is currently generating about 0.01 per unit of risk. If you would invest  2,088  in TRI Pointe Homes on October 8, 2024 and sell it today you would earn a total of  1,511  from holding TRI Pointe Homes or generate 72.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.31%
Values	Daily Returns

TRI Pointe Homes  vs.  Donegal Group B

TRI Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRI Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Donegal Group B

Risk-Adjusted Performance

5 of 100

Insignificant

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

Pair Trading with TRI Pointe and Donegal Group

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

The idea behind TRI Pointe Homes and Donegal Group B 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.