Correlation Between TPL Insurance and Faysal Bank

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

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

Diversification Opportunities for TPL Insurance and Faysal Bank

-0.55

Correlation Coefficient

TPL Insurance  Faysal Bank

Excellent diversification

The 3 months correlation between TPL and Faysal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of TPL Insurance i.e., TPL Insurance and Faysal Bank go up and down completely randomly.

Pair Corralation between TPL Insurance and Faysal Bank

Assuming the 90 days trading horizon TPL Insurance is expected to generate 1.22 times more return on investment than Faysal Bank. However, TPL Insurance is 1.22 times more volatile than Faysal Bank. It trades about 0.04 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.03 per unit of risk. If you would invest  939.00  in TPL Insurance on December 4, 2024 and sell it today you would earn a total of  14.00  from holding TPL Insurance or generate 1.49% return on investment over 90 days.

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

TPL Insurance  vs.  Faysal Bank

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 latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Faysal Bank

Risk-Adjusted Performance

Modest

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

Pair Trading with TPL Insurance and Faysal Bank

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

The idea behind TPL Insurance and Faysal Bank 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.