Correlation Between Travelers Companies and DigiMax Global

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

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

Diversification Opportunities for Travelers Companies and DigiMax Global

-0.34

Correlation Coefficient

Travelers Companies  DigiMax Global

Very good diversification

The 3 months correlation between Travelers and DigiMax is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and DigiMax Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigiMax Global and Travelers Companies 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 The Travelers Companies are associated (or correlated) with DigiMax Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigiMax Global has no effect on the direction of Travelers Companies i.e., Travelers Companies and DigiMax Global go up and down completely randomly.

Pair Corralation between Travelers Companies and DigiMax Global

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.1 times more return on investment than DigiMax Global. However, The Travelers Companies is 10.52 times less risky than DigiMax Global. It trades about 0.15 of its potential returns per unit of risk. DigiMax Global is currently generating about -0.04 per unit of risk. If you would invest  22,688  in The Travelers Companies on September 2, 2024 and sell it today you would earn a total of  3,916  from holding The Travelers Companies or generate 17.26% return on investment over 90 days.

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

The Travelers Companies  vs.  DigiMax Global

The Travelers Companies

Risk-Adjusted Performance

12 of 100

Good

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

DigiMax Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigiMax Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Travelers Companies and DigiMax Global

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

The idea behind The Travelers Companies and DigiMax Global 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.