Correlation Between Travelers Companies and Sino Biopharmaceutica

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

Diversification Opportunities for Travelers Companies and Sino Biopharmaceutica

0.73

Correlation Coefficient

Travelers Companies  Sino Biopharmaceutica

Poor diversification

The 3 months correlation between Travelers and Sino is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Sino Biopharmaceutical Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical 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 Sino Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Biopharmaceutical has no effect on the direction of Travelers Companies i.e., Travelers Companies and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between Travelers Companies and Sino Biopharmaceutica

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.74 times more return on investment than Sino Biopharmaceutica. However, The Travelers Companies is 1.35 times less risky than Sino Biopharmaceutica. It trades about -0.09 of its potential returns per unit of risk. Sino Biopharmaceutical Ltd is currently generating about -0.23 per unit of risk. If you would invest  25,862  in The Travelers Companies on October 21, 2024 and sell it today you would lose (1,910) from holding The Travelers Companies or give up 7.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

The Travelers Companies  vs.  Sino Biopharmaceutical Ltd

The Travelers Companies

Risk-Adjusted Performance

0 of 100

Very 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 latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Sino Biopharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sino Biopharmaceutical Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Travelers Companies and Sino Biopharmaceutica

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

The idea behind The Travelers Companies and Sino Biopharmaceutical Ltd 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.