Correlation Between Travelers Companies and TPT Strategic

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

Diversification Opportunities for Travelers Companies and TPT Strategic

-0.32

Correlation Coefficient

Travelers Companies  TPT Strategic

Very good diversification

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

Pair Corralation between Travelers Companies and TPT Strategic

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the TPT Strategic. But the stock apears to be less risky and, when comparing its historical volatility, The Travelers Companies is 28.97 times less risky than TPT Strategic. The stock trades about -0.28 of its potential returns per unit of risk. The TPT Strategic is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  210.00  in TPT Strategic on October 5, 2024 and sell it today you would earn a total of  690.00  from holding TPT Strategic or generate 328.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

The Travelers Companies  vs.  TPT Strategic

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 inconsistent basic indicators, Travelers Companies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TPT Strategic

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TPT Strategic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, TPT Strategic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travelers Companies and TPT Strategic

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

The idea behind The Travelers Companies and TPT Strategic 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 Transaction History module to view history of all your transactions and understand their impact on performance.