Correlation Between Travelers Companies and ESACW Old

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

Diversification Opportunities for Travelers Companies and ESACW Old

-0.39

Correlation Coefficient

Travelers Companies  ESACW Old

Very good diversification

The 3 months correlation between Travelers and ESACW is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and ESACW Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESACW Old 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 ESACW Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESACW Old has no effect on the direction of Travelers Companies i.e., Travelers Companies and ESACW Old go up and down completely randomly.

Pair Corralation between Travelers Companies and ESACW Old

Considering the 90-day investment horizon Travelers Companies is expected to generate 62.57 times less return on investment than ESACW Old. But when comparing it to its historical volatility, The Travelers Companies is 23.36 times less risky than ESACW Old. It trades about 0.05 of its potential returns per unit of risk. ESACW Old is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5.50  in ESACW Old on October 10, 2024 and sell it today you would earn a total of  5.50  from holding ESACW Old or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	11.92%
Values	Daily Returns

The Travelers Companies  vs.  ESACW Old

The Travelers Companies

Risk-Adjusted Performance

3 of 100

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 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.

ESACW Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESACW Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ESACW Old is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Travelers Companies and ESACW Old

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

The idea behind The Travelers Companies and ESACW Old 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.