Correlation Between Travelers Companies and Fidelity Total

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

Diversification Opportunities for Travelers Companies and Fidelity Total

0.86

Correlation Coefficient

Travelers Companies  Fidelity Total

Very poor diversification

The 3 months correlation between Travelers and Fidelity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Fidelity Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Bond 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Bond has no effect on the direction of Travelers Companies i.e., Travelers Companies and Fidelity Total go up and down completely randomly.

Pair Corralation between Travelers Companies and Fidelity Total

Considering the 90-day investment horizon The Travelers Companies is expected to generate 4.62 times more return on investment than Fidelity Total. However, Travelers Companies is 4.62 times more volatile than Fidelity Total Bond. It trades about 0.11 of its potential returns per unit of risk. Fidelity Total Bond is currently generating about 0.13 per unit of risk. If you would invest  23,889  in The Travelers Companies on December 30, 2024 and sell it today you would earn a total of  2,290  from holding The Travelers Companies or generate 9.59% return on investment over 90 days.

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

The Travelers Companies  vs.  Fidelity Total Bond

The Travelers Companies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Travelers Companies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fidelity Total Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Total Bond are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fidelity Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Travelers Companies and Fidelity Total

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

The idea behind The Travelers Companies and Fidelity Total Bond 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.