Correlation Between Roshan Packages and TPL Insurance

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

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

Diversification Opportunities for Roshan Packages and TPL Insurance

0.23

Correlation Coefficient

Roshan Packages  TPL Insurance

Modest diversification

The 3 months correlation between Roshan and TPL is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance and Roshan Packages 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 Roshan Packages are associated (or correlated) with TPL Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPL Insurance has no effect on the direction of Roshan Packages i.e., Roshan Packages and TPL Insurance go up and down completely randomly.

Pair Corralation between Roshan Packages and TPL Insurance

Assuming the 90 days trading horizon Roshan Packages is expected to generate 0.95 times more return on investment than TPL Insurance. However, Roshan Packages is 1.05 times less risky than TPL Insurance. It trades about 0.17 of its potential returns per unit of risk. TPL Insurance is currently generating about -0.01 per unit of risk. If you would invest  1,509  in Roshan Packages on April 23, 2025 and sell it today you would earn a total of  625.00  from holding Roshan Packages or generate 41.42% return on investment over 90 days.

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

Roshan Packages  vs.  TPL Insurance

Roshan Packages

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, TPL Insurance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Roshan Packages and TPL Insurance

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

The idea behind Roshan Packages and TPL Insurance 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.