Correlation Between Travelers Companies and Harding Loevner

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

Diversification Opportunities for Travelers Companies and Harding Loevner

0.32

Correlation Coefficient

Travelers Companies  Harding Loevner

Weak diversification

The 3 months correlation between Travelers and Harding is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Harding Loevner Frontier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Frontier 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 Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Frontier has no effect on the direction of Travelers Companies i.e., Travelers Companies and Harding Loevner go up and down completely randomly.

Pair Corralation between Travelers Companies and Harding Loevner

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the Harding Loevner. In addition to that, Travelers Companies is 2.42 times more volatile than Harding Loevner Frontier. It trades about -0.07 of its total potential returns per unit of risk. Harding Loevner Frontier is currently generating about -0.03 per unit of volatility. If you would invest  817.00  in Harding Loevner Frontier on November 29, 2024 and sell it today you would lose (9.00) from holding Harding Loevner Frontier or give up 1.1% of portfolio value over 90 days.

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

The Travelers Companies  vs.  Harding Loevner Frontier

The Travelers Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Travelers Companies has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Harding Loevner Frontier

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harding Loevner Frontier has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Harding Loevner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and Harding Loevner

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

The idea behind The Travelers Companies and Harding Loevner Frontier 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.