Correlation Between TRI Pointe and Travelers Companies

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

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

Diversification Opportunities for TRI Pointe and Travelers Companies

0.73

Correlation Coefficient

TRI Pointe  Travelers Companies

Poor diversification

The 3 months correlation between TRI and Travelers is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding TRI Pointe Homes 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 TRI Pointe 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 TRI Pointe Homes 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 TRI Pointe i.e., TRI Pointe and Travelers Companies go up and down completely randomly.

Pair Corralation between TRI Pointe and Travelers Companies

Considering the 90-day investment horizon TRI Pointe Homes is expected to generate 1.31 times more return on investment than Travelers Companies. However, TRI Pointe is 1.31 times more volatile than The Travelers Companies. It trades about 0.03 of its potential returns per unit of risk. The Travelers Companies is currently generating about -0.03 per unit of risk. If you would invest  3,697  in TRI Pointe Homes on October 22, 2024 and sell it today you would earn a total of  27.00  from holding TRI Pointe Homes or generate 0.73% return on investment over 90 days.

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

TRI Pointe Homes  vs.  The Travelers Companies

TRI Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRI Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

The Travelers Companies

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with TRI Pointe and Travelers Companies

The main advantage of trading using opposite TRI Pointe and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRI Pointe 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 TRI Pointe Homes 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.