Correlation Between Travelers Companies and Imperial Metals

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

Diversification Opportunities for Travelers Companies and Imperial Metals

-0.41

Correlation Coefficient

Travelers Companies  Imperial Metals

Very good diversification

The 3 months correlation between Travelers and Imperial is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Imperial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Metals 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 Imperial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Metals has no effect on the direction of Travelers Companies i.e., Travelers Companies and Imperial Metals go up and down completely randomly.

Pair Corralation between Travelers Companies and Imperial Metals

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the Imperial Metals. But the stock apears to be less risky and, when comparing its historical volatility, The Travelers Companies is 2.42 times less risky than Imperial Metals. The stock trades about -0.34 of its potential returns per unit of risk. The Imperial Metals is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  147.00  in Imperial Metals on September 22, 2024 and sell it today you would lose (10.00) from holding Imperial Metals or give up 6.8% of portfolio value over 90 days.

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

The Travelers Companies  vs.  Imperial Metals

The Travelers Companies

Risk-Adjusted Performance

0 of 100

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Travelers Companies and Imperial Metals

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

The idea behind The Travelers Companies and Imperial Metals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.