Correlation Between Travelers Companies and Arconic

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Arconic 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 Arconic 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 Arconic 59 percent, you can compare the effects of market volatilities on Travelers Companies and Arconic 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 Arconic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Arconic.

Diversification Opportunities for Travelers Companies and Arconic

0.43

Correlation Coefficient

Travelers Companies  Arconic

Very weak diversification

The 3 months correlation between Travelers and Arconic is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Arconic 59 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arconic 59 percent 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 Arconic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arconic 59 percent has no effect on the direction of Travelers Companies i.e., Travelers Companies and Arconic go up and down completely randomly.

Pair Corralation between Travelers Companies and Arconic

Considering the 90-day investment horizon The Travelers Companies is expected to generate 3.62 times more return on investment than Arconic. However, Travelers Companies is 3.62 times more volatile than Arconic 59 percent. It trades about 0.11 of its potential returns per unit of risk. Arconic 59 percent is currently generating about -0.05 per unit of risk. If you would invest  23,889  in The Travelers Companies on December 30, 2024 and sell it today you would earn a total of  2,290  from holding The Travelers Companies or generate 9.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

The Travelers Companies  vs.  Arconic 59 percent

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 8 (%) 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.

Arconic 59 percent

Risk-Adjusted Performance

Weak

Over the last 90 days Arconic 59 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Arconic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and Arconic

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

The idea behind The Travelers Companies and Arconic 59 percent 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.