Correlation Between Bright Minds and Travelers Companies

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

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

Diversification Opportunities for Bright Minds and Travelers Companies

0.04

Correlation Coefficient

Bright Minds  Travelers Companies

Significant diversification

The 3 months correlation between Bright and Travelers is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Bright Minds Biosciences 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 Bright Minds 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 Bright Minds Biosciences 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 Bright Minds i.e., Bright Minds and Travelers Companies go up and down completely randomly.

Pair Corralation between Bright Minds and Travelers Companies

Given the investment horizon of 90 days Bright Minds Biosciences is expected to under-perform the Travelers Companies. In addition to that, Bright Minds is 3.4 times more volatile than The Travelers Companies. It trades about -0.07 of its total potential returns per unit of risk. The Travelers Companies is currently generating about -0.05 per unit of volatility. If you would invest  26,493  in The Travelers Companies on November 28, 2024 and sell it today you would lose (1,242) from holding The Travelers Companies or give up 4.69% of portfolio value over 90 days.

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

Bright Minds Biosciences  vs.  The Travelers Companies

Bright Minds Biosciences

Risk-Adjusted Performance

Very Weak

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

The Travelers Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Travelers Companies has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Bright Minds and Travelers Companies

The main advantage of trading using opposite Bright Minds and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Minds 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 Bright Minds Biosciences 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.