Correlation Between Travelers Companies and FlexShares International

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

Diversification Opportunities for Travelers Companies and FlexShares International

-0.03

Correlation Coefficient

Travelers Companies  FlexShares International

Good diversification

The 3 months correlation between Travelers and FlexShares is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and FlexShares International Quali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares International 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 FlexShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares International has no effect on the direction of Travelers Companies i.e., Travelers Companies and FlexShares International go up and down completely randomly.

Pair Corralation between Travelers Companies and FlexShares International

Considering the 90-day investment horizon The Travelers Companies is expected to generate 2.18 times more return on investment than FlexShares International. However, Travelers Companies is 2.18 times more volatile than FlexShares International Quality. It trades about 0.06 of its potential returns per unit of risk. FlexShares International Quality is currently generating about -0.13 per unit of risk. If you would invest  22,938  in The Travelers Companies on October 8, 2024 and sell it today you would earn a total of  1,291  from holding The Travelers Companies or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

The Travelers Companies  vs.  FlexShares International Quali

The Travelers Companies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

FlexShares International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares International Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, FlexShares International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Travelers Companies and FlexShares International

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

The idea behind The Travelers Companies and FlexShares International Quality 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.