Correlation Between TPL Insurance and Matco Foods

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

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

Diversification Opportunities for TPL Insurance and Matco Foods

-0.38

Correlation Coefficient

TPL Insurance  Matco Foods

Very good diversification

The 3 months correlation between TPL and Matco is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods 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 Matco Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matco Foods has no effect on the direction of TPL Insurance i.e., TPL Insurance and Matco Foods go up and down completely randomly.

Pair Corralation between TPL Insurance and Matco Foods

Assuming the 90 days trading horizon TPL Insurance is expected to generate 1.95 times less return on investment than Matco Foods. In addition to that, TPL Insurance is 1.09 times more volatile than Matco Foods. It trades about 0.03 of its total potential returns per unit of risk. Matco Foods is currently generating about 0.06 per unit of volatility. If you would invest  2,680  in Matco Foods on September 4, 2024 and sell it today you would earn a total of  251.00  from holding Matco Foods or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

TPL Insurance  vs.  Matco Foods

TPL Insurance

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TPL Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TPL Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Matco Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Matco Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TPL Insurance and Matco Foods

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

The idea behind TPL Insurance and Matco Foods 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.