Correlation Between TPL Insurance and Oil

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

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

Diversification Opportunities for TPL Insurance and Oil

0.34

Correlation Coefficient

TPL Insurance  Oil

Weak diversification

The 3 months correlation between TPL and Oil is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas 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 Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of TPL Insurance i.e., TPL Insurance and Oil go up and down completely randomly.

Pair Corralation between TPL Insurance and Oil

Assuming the 90 days trading horizon TPL Insurance is expected to under-perform the Oil. In addition to that, TPL Insurance is 1.23 times more volatile than Oil and Gas. It trades about -0.12 of its total potential returns per unit of risk. Oil and Gas is currently generating about 0.0 per unit of volatility. If you would invest  22,838  in Oil and Gas on December 21, 2024 and sell it today you would lose (157.00) from holding Oil and Gas or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

TPL Insurance  vs.  Oil and Gas

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Oil and Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oil and Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TPL Insurance and Oil

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

The idea behind TPL Insurance and Oil and Gas 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.