Correlation Between Travelers Companies and United States

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and United States 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 United States 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 United States 12, you can compare the effects of market volatilities on Travelers Companies and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and United States.

Diversification Opportunities for Travelers Companies and United States

0.71

Correlation Coefficient

Travelers Companies  United States

Poor diversification

The 3 months correlation between Travelers and United is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and United States 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States 12 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States 12 has no effect on the direction of Travelers Companies i.e., Travelers Companies and United States go up and down completely randomly.

Pair Corralation between Travelers Companies and United States

Considering the 90-day investment horizon Travelers Companies is expected to generate 2.28 times less return on investment than United States. But when comparing it to its historical volatility, The Travelers Companies is 1.87 times less risky than United States. It trades about 0.11 of its potential returns per unit of risk. United States 12 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  828.00  in United States 12 on December 28, 2024 and sell it today you would earn a total of  185.00  from holding United States 12 or generate 22.34% return on investment over 90 days.

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

The Travelers Companies  vs.  United States 12

The Travelers Companies

Risk-Adjusted Performance

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

United States 12

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States 12 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, United States disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travelers Companies and United States

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

The idea behind The Travelers Companies and United States 12 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.