Correlation Between Travelers Companies and Thunder Bridge

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

Diversification Opportunities for Travelers Companies and Thunder Bridge

-0.52

Correlation Coefficient

Travelers Companies  Thunder Bridge

Excellent diversification

The 3 months correlation between Travelers and Thunder is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Thunder Bridge Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Bridge Capital 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 Thunder Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Bridge Capital has no effect on the direction of Travelers Companies i.e., Travelers Companies and Thunder Bridge go up and down completely randomly.

Pair Corralation between Travelers Companies and Thunder Bridge

Considering the 90-day investment horizon Travelers Companies is expected to generate 2.71 times less return on investment than Thunder Bridge. But when comparing it to its historical volatility, The Travelers Companies is 1.7 times less risky than Thunder Bridge. It trades about 0.08 of its potential returns per unit of risk. Thunder Bridge Capital is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,055  in Thunder Bridge Capital on October 7, 2024 and sell it today you would earn a total of  169.00  from holding Thunder Bridge Capital or generate 16.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	74.6%
Values	Daily Returns

The Travelers Companies  vs.  Thunder Bridge Capital

The Travelers Companies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Travelers Companies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Thunder Bridge Capital

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Thunder Bridge Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively uncertain fundamental indicators, Thunder Bridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travelers Companies and Thunder Bridge

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

The idea behind The Travelers Companies and Thunder Bridge Capital 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.