Correlation Between Travelers Companies and Walmart

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

Diversification Opportunities for Travelers Companies and Walmart

0.75

Correlation Coefficient

Travelers Companies  Walmart

Poor diversification

The 3 months correlation between Travelers and Walmart is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Travelers Companies i.e., Travelers Companies and Walmart go up and down completely randomly.

Pair Corralation between Travelers Companies and Walmart

Assuming the 90 days trading horizon Travelers Companies is expected to generate 1.99 times less return on investment than Walmart. But when comparing it to its historical volatility, The Travelers Companies is 3.04 times less risky than Walmart. It trades about 0.14 of its potential returns per unit of risk. Walmart is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  180,602  in Walmart on September 24, 2024 and sell it today you would earn a total of  4,398  from holding Walmart or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

The Travelers Companies  vs.  Walmart

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.

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travelers Companies and Walmart

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

The idea behind The Travelers Companies and Walmart 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.