Correlation Between Travelers Companies and Invesco Global

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

Diversification Opportunities for Travelers Companies and Invesco Global

-0.44

Correlation Coefficient

Travelers Companies  Invesco Global

Very good diversification

The 3 months correlation between Travelers and Invesco is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Invesco Global Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Water 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 Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Water has no effect on the direction of Travelers Companies i.e., Travelers Companies and Invesco Global go up and down completely randomly.

Pair Corralation between Travelers Companies and Invesco Global

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the Invesco Global. In addition to that, Travelers Companies is 2.02 times more volatile than Invesco Global Water. It trades about -0.25 of its total potential returns per unit of risk. Invesco Global Water is currently generating about 0.0 per unit of volatility. If you would invest  4,068  in Invesco Global Water on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Invesco Global Water or generate 0.0% return on investment over 90 days.

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

The Travelers Companies  vs.  Invesco Global Water

The Travelers Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 2 (%) 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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco Global Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Global Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Invesco Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and Invesco Global

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

The idea behind The Travelers Companies and Invesco Global Water 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.