Correlation Between Travelers Companies and Invesco SP

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Invesco SP 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 SP 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 SP 500, you can compare the effects of market volatilities on Travelers Companies and Invesco SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Invesco SP.

Diversification Opportunities for Travelers Companies and Invesco SP

0.82

Correlation Coefficient

Travelers Companies  Invesco SP

Very poor diversification

The 3 months correlation between Travelers and Invesco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Travelers Companies i.e., Travelers Companies and Invesco SP go up and down completely randomly.

Pair Corralation between Travelers Companies and Invesco SP

Considering the 90-day investment horizon The Travelers Companies is expected to generate 2.53 times more return on investment than Invesco SP. However, Travelers Companies is 2.53 times more volatile than Invesco SP 500. It trades about 0.13 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.29 per unit of risk. If you would invest  23,041  in The Travelers Companies on September 4, 2024 and sell it today you would earn a total of  3,310  from holding The Travelers Companies or generate 14.37% return on investment over 90 days.

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

The Travelers Companies  vs.  Invesco SP 500

The Travelers Companies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Travelers Companies showed solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP 500

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Invesco SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travelers Companies and Invesco SP

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

The idea behind The Travelers Companies and Invesco SP 500 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.