Correlation Between TPL Insurance and Asia Insurance

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

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

Diversification Opportunities for TPL Insurance and Asia Insurance

-0.26

Correlation Coefficient

TPL Insurance  Asia Insurance

Very good diversification

The 3 months correlation between TPL and Asia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Asia Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Insurance 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 Asia Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Insurance has no effect on the direction of TPL Insurance i.e., TPL Insurance and Asia Insurance go up and down completely randomly.

Pair Corralation between TPL Insurance and Asia Insurance

Assuming the 90 days trading horizon TPL Insurance is expected to generate 188.1 times less return on investment than Asia Insurance. In addition to that, TPL Insurance is 1.1 times more volatile than Asia Insurance. It trades about 0.0 of its total potential returns per unit of risk. Asia Insurance is currently generating about 0.48 per unit of volatility. If you would invest  1,400  in Asia Insurance on April 21, 2025 and sell it today you would earn a total of  500.00  from holding Asia Insurance or generate 35.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.65%
Values	Daily Returns

TPL Insurance  vs.  Asia Insurance

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.

Asia Insurance

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Insurance are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Asia Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TPL Insurance and Asia Insurance

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

The idea behind TPL Insurance and Asia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.