Correlation Between TPL Insurance and Dost Steels

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

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

Diversification Opportunities for TPL Insurance and Dost Steels

-0.14

Correlation Coefficient

TPL Insurance  Dost Steels

Good diversification

The 3 months correlation between TPL and Dost is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Dost Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dost Steels and TPL 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 TPL Insurance are associated (or correlated) with Dost Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dost Steels has no effect on the direction of TPL Insurance i.e., TPL Insurance and Dost Steels go up and down completely randomly.

Pair Corralation between TPL Insurance and Dost Steels

Assuming the 90 days trading horizon TPL Insurance is expected to generate 1.21 times more return on investment than Dost Steels. However, TPL Insurance is 1.21 times more volatile than Dost Steels. It trades about 0.04 of its potential returns per unit of risk. Dost Steels is currently generating about 0.01 per unit of risk. If you would invest  994.00  in TPL Insurance on October 25, 2024 and sell it today you would earn a total of  52.00  from holding TPL Insurance or generate 5.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

TPL Insurance  vs.  Dost Steels

TPL Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TPL Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TPL Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dost Steels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dost Steels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Dost Steels is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with TPL Insurance and Dost Steels

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

The idea behind TPL Insurance and Dost Steels 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.