Correlation Between Travelers Companies and IShares MSCI

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

Diversification Opportunities for Travelers Companies and IShares MSCI

-0.63

Correlation Coefficient

Travelers Companies  IShares MSCI

Excellent diversification

The 3 months correlation between Travelers and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of Travelers Companies i.e., Travelers Companies and IShares MSCI go up and down completely randomly.

Pair Corralation between Travelers Companies and IShares MSCI

Considering the 90-day investment horizon The Travelers Companies is expected to generate 1.49 times more return on investment than IShares MSCI. However, Travelers Companies is 1.49 times more volatile than iShares MSCI USA. It trades about 0.11 of its potential returns per unit of risk. iShares MSCI USA is currently generating about -0.08 per unit of risk. If you would invest  23,889  in The Travelers Companies on December 30, 2024 and sell it today you would earn a total of  2,290  from holding The Travelers Companies or generate 9.59% return on investment over 90 days.

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

The Travelers Companies  vs.  iShares MSCI USA

The Travelers Companies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Travelers Companies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares MSCI USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Travelers Companies and IShares MSCI

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

The idea behind The Travelers Companies and iShares MSCI USA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.