Correlation Between London Security and TP ICAP

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

By analyzing existing cross correlation between London Security Plc and TP ICAP Group, you can compare the effects of market volatilities on London Security and TP ICAP 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 London Security with a short position of TP ICAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and TP ICAP.

Diversification Opportunities for London Security and TP ICAP

-0.85

Correlation Coefficient

London Security  TP ICAP

Pay attention - limited upside

The 3 months correlation between London and TCAP is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and TP ICAP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TP ICAP Group and London Security 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 London Security Plc are associated (or correlated) with TP ICAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TP ICAP Group has no effect on the direction of London Security i.e., London Security and TP ICAP go up and down completely randomly.

Pair Corralation between London Security and TP ICAP

Assuming the 90 days trading horizon London Security Plc is expected to under-perform the TP ICAP. But the stock apears to be less risky and, when comparing its historical volatility, London Security Plc is 3.64 times less risky than TP ICAP. The stock trades about -0.15 of its potential returns per unit of risk. The TP ICAP Group is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  24,450  in TP ICAP Group on April 22, 2025 and sell it today you would earn a total of  6,400  from holding TP ICAP Group or generate 26.18% return on investment over 90 days.

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

London Security Plc  vs.  TP ICAP Group

London Security Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, London Security is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

TP ICAP Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TP ICAP Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, TP ICAP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with London Security and TP ICAP

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

The idea behind London Security Plc and TP ICAP Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.