Correlation Between Agha Steel and TPL Insurance

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

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

Diversification Opportunities for Agha Steel and TPL Insurance

-0.06

Correlation Coefficient

Agha Steel  TPL Insurance

Good diversification

The 3 months correlation between Agha and TPL is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Agha Steel Industries and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance and Agha Steel 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 Agha Steel Industries 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 Agha Steel i.e., Agha Steel and TPL Insurance go up and down completely randomly.

Pair Corralation between Agha Steel and TPL Insurance

Assuming the 90 days trading horizon Agha Steel Industries is expected to under-perform the TPL Insurance. In addition to that, Agha Steel is 1.02 times more volatile than TPL Insurance. It trades about -0.08 of its total potential returns per unit of risk. TPL Insurance is currently generating about 0.07 per unit of volatility. If you would invest  962.00  in TPL Insurance on September 15, 2024 and sell it today you would earn a total of  108.00  from holding TPL Insurance or generate 11.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Agha Steel Industries  vs.  TPL Insurance

Agha Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TPL Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TPL Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TPL Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agha Steel and TPL Insurance

The main advantage of trading using opposite Agha Steel and TPL Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agha Steel 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 Agha Steel Industries 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.