Correlation Between Travelers Companies and Homasote

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

Diversification Opportunities for Travelers Companies and Homasote

-0.38

Correlation Coefficient

Travelers Companies  Homasote

Very good diversification

The 3 months correlation between Travelers and Homasote is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Homasote Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homasote 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 Homasote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homasote has no effect on the direction of Travelers Companies i.e., Travelers Companies and Homasote go up and down completely randomly.

Pair Corralation between Travelers Companies and Homasote

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the Homasote. But the stock apears to be less risky and, when comparing its historical volatility, The Travelers Companies is 6.32 times less risky than Homasote. The stock trades about -0.31 of its potential returns per unit of risk. The Homasote Co is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  293.00  in Homasote Co on October 6, 2024 and sell it today you would earn a total of  172.00  from holding Homasote Co or generate 58.7% return on investment over 90 days.

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

The Travelers Companies  vs.  Homasote Co

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Homasote

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Homasote Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Homasote exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travelers Companies and Homasote

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

The idea behind The Travelers Companies and Homasote Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.