Correlation Between TPL Insurance and Synthetic Products

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

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

Diversification Opportunities for TPL Insurance and Synthetic Products

0.56

Correlation Coefficient

TPL Insurance  Synthetic Products

Very weak diversification

The 3 months correlation between TPL and Synthetic is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Synthetic Products Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synthetic Products 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 Synthetic Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synthetic Products has no effect on the direction of TPL Insurance i.e., TPL Insurance and Synthetic Products go up and down completely randomly.

Pair Corralation between TPL Insurance and Synthetic Products

Assuming the 90 days trading horizon TPL Insurance is expected to under-perform the Synthetic Products. But the stock apears to be less risky and, when comparing its historical volatility, TPL Insurance is 1.3 times less risky than Synthetic Products. The stock trades about -0.11 of its potential returns per unit of risk. The Synthetic Products Enterprises is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,531  in Synthetic Products Enterprises on December 23, 2024 and sell it today you would lose (349.00) from holding Synthetic Products Enterprises or give up 7.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

TPL Insurance  vs.  Synthetic Products Enterprises

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.

Synthetic Products

Risk-Adjusted Performance

Very Weak

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

Pair Trading with TPL Insurance and Synthetic Products

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

The idea behind TPL Insurance and Synthetic Products Enterprises 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.