Correlation Between Travelers Companies and Fidelity Blue

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

Diversification Opportunities for Travelers Companies and Fidelity Blue

0.76

Correlation Coefficient

Travelers Companies  Fidelity Blue

Poor diversification

The 3 months correlation between Travelers and Fidelity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Fidelity Blue Chip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Blue Chip 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 Fidelity Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Blue Chip has no effect on the direction of Travelers Companies i.e., Travelers Companies and Fidelity Blue go up and down completely randomly.

Pair Corralation between Travelers Companies and Fidelity Blue

Considering the 90-day investment horizon The Travelers Companies is expected to generate 2.72 times more return on investment than Fidelity Blue. However, Travelers Companies is 2.72 times more volatile than Fidelity Blue Chip. It trades about 0.03 of its potential returns per unit of risk. Fidelity Blue Chip is currently generating about 0.03 per unit of risk. If you would invest  24,125  in The Travelers Companies on September 16, 2024 and sell it today you would earn a total of  505.00  from holding The Travelers Companies or generate 2.09% return on investment over 90 days.

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

The Travelers Companies  vs.  Fidelity Blue Chip

The Travelers Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 2 (%) 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.

Fidelity Blue Chip

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Blue Chip are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Fidelity Blue 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 Travelers Companies and Fidelity Blue

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

The idea behind The Travelers Companies and Fidelity Blue Chip 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.