Correlation Between Travelers Companies and Solitron Devices

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

Diversification Opportunities for Travelers Companies and Solitron Devices

-0.72

Correlation Coefficient

Travelers Companies  Solitron Devices

Pay attention - limited upside

The 3 months correlation between Travelers and Solitron is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Solitron Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitron Devices 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 Solitron Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitron Devices has no effect on the direction of Travelers Companies i.e., Travelers Companies and Solitron Devices go up and down completely randomly.

Pair Corralation between Travelers Companies and Solitron Devices

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.65 times more return on investment than Solitron Devices. However, The Travelers Companies is 1.53 times less risky than Solitron Devices. It trades about 0.12 of its potential returns per unit of risk. Solitron Devices is currently generating about -0.06 per unit of risk. If you would invest  23,084  in The Travelers Companies on September 5, 2024 and sell it today you would earn a total of  2,975  from holding The Travelers Companies or generate 12.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

The Travelers Companies  vs.  Solitron Devices

The Travelers Companies

Risk-Adjusted Performance

9 of 100

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 weak basic indicators, Travelers Companies showed solid returns over the last few months and may actually be approaching a breakup point.

Solitron Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitron Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Travelers Companies and Solitron Devices

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

The idea behind The Travelers Companies and Solitron Devices 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.