Correlation Between Travelers Companies and Large Capitalization

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

Diversification Opportunities for Travelers Companies and Large Capitalization

-0.75

Correlation Coefficient

Travelers Companies  Large Capitalization

Pay attention - limited upside

The 3 months correlation between Travelers and Large is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Large Capitalization Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Capitalization 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 Large Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Capitalization has no effect on the direction of Travelers Companies i.e., Travelers Companies and Large Capitalization go up and down completely randomly.

Pair Corralation between Travelers Companies and Large Capitalization

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.9 times more return on investment than Large Capitalization. However, The Travelers Companies is 1.11 times less risky than Large Capitalization. It trades about 0.12 of its potential returns per unit of risk. Large Capitalization Growth is currently generating about -0.1 per unit of risk. If you would invest  23,889  in The Travelers Companies on December 29, 2024 and sell it today you would earn a total of  2,379  from holding The Travelers Companies or generate 9.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

The Travelers Companies  vs.  Large Capitalization Growth

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 9 (%) 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.

Large Capitalization

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Capitalization Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Travelers Companies and Large Capitalization

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

The idea behind The Travelers Companies and Large Capitalization Growth 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.