Correlation Between TRANSCANADA and Travelers Companies

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

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

Diversification Opportunities for TRANSCANADA and Travelers Companies

0.0

Correlation Coefficient

TRANSCANADA  Travelers Companies

Pay attention - limited upside

The 3 months correlation between TRANSCANADA and Travelers is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TRANSCANADA PIPELINES LTD and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies and TRANSCANADA 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 TRANSCANADA PIPELINES LTD are associated (or correlated) with Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of TRANSCANADA i.e., TRANSCANADA and Travelers Companies go up and down completely randomly.

Pair Corralation between TRANSCANADA and Travelers Companies

If you would invest  17,984  in The Travelers Companies on September 4, 2024 and sell it today you would earn a total of  8,075  from holding The Travelers Companies or generate 44.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

TRANSCANADA PIPELINES LTD  vs.  The Travelers Companies

TRANSCANADA PIPELINES LTD

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with TRANSCANADA and Travelers Companies

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

The idea behind TRANSCANADA PIPELINES LTD and The Travelers Companies 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.