Correlation Between Banco Bilbao and Travelers Companies

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

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

Diversification Opportunities for Banco Bilbao and Travelers Companies

-0.45

Correlation Coefficient

Banco Bilbao  Travelers Companies

Very good diversification

The 3 months correlation between Banco and Travelers is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Vizcaya 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 Banco Bilbao 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 Banco Bilbao Vizcaya 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 Banco Bilbao i.e., Banco Bilbao and Travelers Companies go up and down completely randomly.

Pair Corralation between Banco Bilbao and Travelers Companies

Assuming the 90 days trading horizon Banco Bilbao Vizcaya is expected to generate 0.91 times more return on investment than Travelers Companies. However, Banco Bilbao Vizcaya is 1.1 times less risky than Travelers Companies. It trades about 0.07 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.05 per unit of risk. If you would invest  10,659  in Banco Bilbao Vizcaya on September 24, 2024 and sell it today you would earn a total of  8,841  from holding Banco Bilbao Vizcaya or generate 82.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Banco Bilbao Vizcaya  vs.  The Travelers Companies

Banco Bilbao Vizcaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bilbao Vizcaya has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Banco Bilbao 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

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 6 (%) 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 Banco Bilbao and Travelers Companies

The main advantage of trading using opposite Banco Bilbao and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bilbao 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 Banco Bilbao Vizcaya 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.