Correlation Between TPL Insurance and Ghani Chemical

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

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

Diversification Opportunities for TPL Insurance and Ghani Chemical

0.6

Correlation Coefficient

TPL Insurance  Ghani Chemical

Poor diversification

The 3 months correlation between TPL and Ghani is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Ghani Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Chemical Industries 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 Ghani Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Chemical Industries has no effect on the direction of TPL Insurance i.e., TPL Insurance and Ghani Chemical go up and down completely randomly.

Pair Corralation between TPL Insurance and Ghani Chemical

Assuming the 90 days trading horizon TPL Insurance is expected to under-perform the Ghani Chemical. But the stock apears to be less risky and, when comparing its historical volatility, TPL Insurance is 1.37 times less risky than Ghani Chemical. The stock trades about -0.05 of its potential returns per unit of risk. The Ghani Chemical Industries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,532  in Ghani Chemical Industries on October 11, 2024 and sell it today you would lose (11.00) from holding Ghani Chemical Industries or give up 0.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

TPL Insurance  vs.  Ghani Chemical Industries

TPL Insurance

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TPL Insurance are ranked lower than 2 (%) 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.

Ghani Chemical Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ghani Chemical Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ghani Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TPL Insurance and Ghani Chemical

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

The idea behind TPL Insurance and Ghani Chemical Industries 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.