Correlation Between Travelers Companies and 55305BAS0

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and 55305BAS0 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 55305BAS0 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 M I HOMES, you can compare the effects of market volatilities on Travelers Companies and 55305BAS0 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 55305BAS0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and 55305BAS0.

Diversification Opportunities for Travelers Companies and 55305BAS0

-0.48

Correlation Coefficient

Travelers Companies  55305BAS0

Very good diversification

The 3 months correlation between Travelers and 55305BAS0 is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and M I HOMES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M I HOMES 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 55305BAS0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M I HOMES has no effect on the direction of Travelers Companies i.e., Travelers Companies and 55305BAS0 go up and down completely randomly.

Pair Corralation between Travelers Companies and 55305BAS0

Considering the 90-day investment horizon The Travelers Companies is expected to generate 2.49 times more return on investment than 55305BAS0. However, Travelers Companies is 2.49 times more volatile than M I HOMES. It trades about 0.12 of its potential returns per unit of risk. M I HOMES is currently generating about -0.07 per unit of risk. If you would invest  23,084  in The Travelers Companies on September 5, 2024 and sell it today you would earn a total of  2,975  from holding The Travelers Companies or generate 12.89% return on investment over 90 days.

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

The Travelers Companies  vs.  M I HOMES

The Travelers Companies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Travelers Companies showed solid returns over the last few months and may actually be approaching a breakup point.

M I HOMES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M I HOMES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 55305BAS0 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and 55305BAS0

The main advantage of trading using opposite Travelers Companies and 55305BAS0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, 55305BAS0 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 55305BAS0 will offset losses from the drop in 55305BAS0's long position.

The idea behind The Travelers Companies and M I HOMES 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.