Correlation Between Trupanion and Alliance Recovery

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

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

Diversification Opportunities for Trupanion and Alliance Recovery

-0.29

Correlation Coefficient

Trupanion  Alliance Recovery

Very good diversification

The 3 months correlation between Trupanion and Alliance is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Trupanion and Alliance Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Recovery and Trupanion 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 Trupanion are associated (or correlated) with Alliance Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Recovery has no effect on the direction of Trupanion i.e., Trupanion and Alliance Recovery go up and down completely randomly.

Pair Corralation between Trupanion and Alliance Recovery

Given the investment horizon of 90 days Trupanion is expected to under-perform the Alliance Recovery. But the stock apears to be less risky and, when comparing its historical volatility, Trupanion is 2.46 times less risky than Alliance Recovery. The stock trades about -0.17 of its potential returns per unit of risk. The Alliance Recovery is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.26  in Alliance Recovery on December 4, 2024 and sell it today you would earn a total of  0.01  from holding Alliance Recovery or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Trupanion  vs.  Alliance Recovery

Trupanion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trupanion has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Alliance Recovery

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Recovery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Alliance Recovery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trupanion and Alliance Recovery

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

The idea behind Trupanion and Alliance Recovery 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 Stocks Directory module to find actively traded stocks across global markets.