Correlation Between Trupanion and Worthington Steel

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

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

Diversification Opportunities for Trupanion and Worthington Steel

0.65

Correlation Coefficient

Trupanion  Worthington Steel

Poor diversification

The 3 months correlation between Trupanion and Worthington is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Trupanion and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel and Trupanion 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 Trupanion are associated (or correlated) with Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of Trupanion i.e., Trupanion and Worthington Steel go up and down completely randomly.

Pair Corralation between Trupanion and Worthington Steel

Given the investment horizon of 90 days Trupanion is expected to generate 1.83 times less return on investment than Worthington Steel. But when comparing it to its historical volatility, Trupanion is 1.05 times less risky than Worthington Steel. It trades about 0.09 of its potential returns per unit of risk. Worthington Steel is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,281  in Worthington Steel on September 13, 2024 and sell it today you would earn a total of  1,132  from holding Worthington Steel or generate 34.5% return on investment over 90 days.

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

Trupanion  vs.  Worthington Steel

Trupanion

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

Worthington Steel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Worthington Steel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Worthington Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trupanion and Worthington Steel

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

The idea behind Trupanion and Worthington Steel 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.