Correlation Between Travelers Companies and Banco Bilbao

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

Diversification Opportunities for Travelers Companies and Banco Bilbao

0.05

Correlation Coefficient

Travelers Companies  Banco Bilbao

Significant diversification

The 3 months correlation between Travelers and Banco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Banco Bilbao Vizcaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Vizcaya 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 Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Vizcaya has no effect on the direction of Travelers Companies i.e., Travelers Companies and Banco Bilbao go up and down completely randomly.

Pair Corralation between Travelers Companies and Banco Bilbao

Assuming the 90 days trading horizon Travelers Companies is expected to generate 14.52 times less return on investment than Banco Bilbao. But when comparing it to its historical volatility, The Travelers Companies is 1.94 times less risky than Banco Bilbao. It trades about 0.04 of its potential returns per unit of risk. Banco Bilbao Vizcaya is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  20,005  in Banco Bilbao Vizcaya on December 28, 2024 and sell it today you would earn a total of  8,649  from holding Banco Bilbao Vizcaya or generate 43.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

The Travelers Companies  vs.  Banco Bilbao Vizcaya

The Travelers Companies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Travelers Companies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco Bilbao Vizcaya

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Vizcaya are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Banco Bilbao showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travelers Companies and Banco Bilbao

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

The idea behind The Travelers Companies and Banco Bilbao Vizcaya 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.