Correlation Between Travelers Companies and ProShares UltraShort

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

Diversification Opportunities for Travelers Companies and ProShares UltraShort

-0.57

Correlation Coefficient

Travelers Companies  ProShares UltraShort

Excellent diversification

The 3 months correlation between Travelers and ProShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and ProShares UltraShort Semicondu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Travelers Companies i.e., Travelers Companies and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Travelers Companies and ProShares UltraShort

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the ProShares UltraShort. But the stock apears to be less risky and, when comparing its historical volatility, The Travelers Companies is 2.74 times less risky than ProShares UltraShort. The stock trades about -0.21 of its potential returns per unit of risk. The ProShares UltraShort Semiconductors is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,778  in ProShares UltraShort Semiconductors on September 21, 2024 and sell it today you would earn a total of  3.00  from holding ProShares UltraShort Semiconductors or generate 0.11% return on investment over 90 days.

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

The Travelers Companies  vs.  ProShares UltraShort Semicondu

The Travelers Companies

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with Travelers Companies and ProShares UltraShort

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

The idea behind The Travelers Companies and ProShares UltraShort Semiconductors 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.