Correlation Between Lancashire Holdings and Trupanion

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

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

Diversification Opportunities for Lancashire Holdings and Trupanion

0.13

Correlation Coefficient

Lancashire Holdings  Trupanion

Average diversification

The 3 months correlation between Lancashire and Trupanion is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Lancashire Holdings Limited and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion and Lancashire Holdings 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 Lancashire Holdings Limited are associated (or correlated) with Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of Lancashire Holdings i.e., Lancashire Holdings and Trupanion go up and down completely randomly.

Pair Corralation between Lancashire Holdings and Trupanion

Assuming the 90 days horizon Lancashire Holdings is expected to generate 4.11 times less return on investment than Trupanion. But when comparing it to its historical volatility, Lancashire Holdings Limited is 2.56 times less risky than Trupanion. It trades about 0.08 of its potential returns per unit of risk. Trupanion is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,212  in Trupanion on April 25, 2025 and sell it today you would earn a total of  1,044  from holding Trupanion or generate 32.5% return on investment over 90 days.

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

Lancashire Holdings Limited  vs.  Trupanion

Lancashire Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lancashire Holdings Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lancashire Holdings may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Trupanion

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancashire Holdings and Trupanion

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

The idea behind Lancashire Holdings Limited and Trupanion 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.