Correlation Between Travelers Companies and Trican Well

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

Diversification Opportunities for Travelers Companies and Trican Well

-0.34

Correlation Coefficient

Travelers Companies  Trican Well

Very good diversification

The 3 months correlation between Travelers and Trican is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Trican Well Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trican Well Service 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 Trican Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trican Well Service has no effect on the direction of Travelers Companies i.e., Travelers Companies and Trican Well go up and down completely randomly.

Pair Corralation between Travelers Companies and Trican Well

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.8 times more return on investment than Trican Well. However, The Travelers Companies is 1.25 times less risky than Trican Well. It trades about 0.11 of its potential returns per unit of risk. Trican Well Service is currently generating about 0.0 per unit of risk. If you would invest  23,344  in The Travelers Companies on September 6, 2024 and sell it today you would earn a total of  2,834  from holding The Travelers Companies or generate 12.14% return on investment over 90 days.

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

The Travelers Companies  vs.  Trican Well Service

The Travelers Companies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 8 (%) 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 January 2025.

Trican Well Service

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Trican Well Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Trican Well is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Travelers Companies and Trican Well

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

The idea behind The Travelers Companies and Trican Well Service 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.