Correlation Between TCPL Packaging and TPL Plastech

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

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

Diversification Opportunities for TCPL Packaging and TPL Plastech

0.6

Correlation Coefficient

TCPL Packaging  TPL Plastech

Poor diversification

The 3 months correlation between TCPL and TPL is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding TCPL Packaging Limited and TPL Plastech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Plastech Limited and TCPL Packaging 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 TCPL Packaging Limited are associated (or correlated) with TPL Plastech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPL Plastech Limited has no effect on the direction of TCPL Packaging i.e., TCPL Packaging and TPL Plastech go up and down completely randomly.

Pair Corralation between TCPL Packaging and TPL Plastech

Assuming the 90 days trading horizon TCPL Packaging Limited is expected to under-perform the TPL Plastech. In addition to that, TCPL Packaging is 1.07 times more volatile than TPL Plastech Limited. It trades about -0.04 of its total potential returns per unit of risk. TPL Plastech Limited is currently generating about -0.02 per unit of volatility. If you would invest  11,193  in TPL Plastech Limited on September 5, 2024 and sell it today you would lose (484.00) from holding TPL Plastech Limited or give up 4.32% of portfolio value over 90 days.

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

TCPL Packaging Limited  vs.  TPL Plastech Limited

TCPL Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TCPL Packaging Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TCPL Packaging is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

TPL Plastech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPL Plastech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TPL Plastech is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TCPL Packaging and TPL Plastech

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

The idea behind TCPL Packaging Limited and TPL Plastech Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.