Correlation Between Travelers Companies and ThedirectoryCom

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and ThedirectoryCom 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 ThedirectoryCom 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 ThedirectoryCom, you can compare the effects of market volatilities on Travelers Companies and ThedirectoryCom 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 ThedirectoryCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and ThedirectoryCom.

Diversification Opportunities for Travelers Companies and ThedirectoryCom

-0.69

Correlation Coefficient

Travelers Companies  ThedirectoryCom

Excellent diversification

The 3 months correlation between Travelers and ThedirectoryCom is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and ThedirectoryCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ThedirectoryCom 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 ThedirectoryCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ThedirectoryCom has no effect on the direction of Travelers Companies i.e., Travelers Companies and ThedirectoryCom go up and down completely randomly.

Pair Corralation between Travelers Companies and ThedirectoryCom

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.14 times more return on investment than ThedirectoryCom. However, The Travelers Companies is 7.37 times less risky than ThedirectoryCom. It trades about 0.04 of its potential returns per unit of risk. ThedirectoryCom is currently generating about -0.13 per unit of risk. If you would invest  23,684  in The Travelers Companies on September 13, 2024 and sell it today you would earn a total of  830.00  from holding The Travelers Companies or generate 3.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

The Travelers Companies  vs.  ThedirectoryCom

The Travelers Companies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ThedirectoryCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ThedirectoryCom 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 technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Travelers Companies and ThedirectoryCom

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

The idea behind The Travelers Companies and ThedirectoryCom 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.