Correlation Between Travelers Companies and TRI Pointe

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

Diversification Opportunities for Travelers Companies and TRI Pointe

0.23

Correlation Coefficient

Travelers Companies  TRI Pointe

Modest diversification

The 3 months correlation between Travelers and TRI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and TRI Pointe Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRI Pointe Homes 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 TRI Pointe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRI Pointe Homes has no effect on the direction of Travelers Companies i.e., Travelers Companies and TRI Pointe go up and down completely randomly.

Pair Corralation between Travelers Companies and TRI Pointe

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.97 times more return on investment than TRI Pointe. However, The Travelers Companies is 1.03 times less risky than TRI Pointe. It trades about -0.28 of its potential returns per unit of risk. TRI Pointe Homes is currently generating about -0.55 per unit of risk. If you would invest  26,006  in The Travelers Companies on October 7, 2024 and sell it today you would lose (1,777) from holding The Travelers Companies or give up 6.83% of portfolio value over 90 days.

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

The Travelers Companies  vs.  TRI Pointe Homes

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 inconsistent basic indicators, Travelers Companies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TRI Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRI Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Travelers Companies and TRI Pointe

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

The idea behind The Travelers Companies and TRI Pointe Homes 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..