Correlation Between Travelers Companies and ASTRAZENECA

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and ASTRAZENECA 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 ASTRAZENECA 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 ASTRAZENECA PLC 4, you can compare the effects of market volatilities on Travelers Companies and ASTRAZENECA 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 ASTRAZENECA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and ASTRAZENECA.

Diversification Opportunities for Travelers Companies and ASTRAZENECA

0.25

Correlation Coefficient

Travelers Companies  ASTRAZENECA

Modest diversification

The 3 months correlation between Travelers and ASTRAZENECA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and ASTRAZENECA PLC 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASTRAZENECA PLC 4 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 ASTRAZENECA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASTRAZENECA PLC 4 has no effect on the direction of Travelers Companies i.e., Travelers Companies and ASTRAZENECA go up and down completely randomly.

Pair Corralation between Travelers Companies and ASTRAZENECA

Considering the 90-day investment horizon Travelers Companies is expected to generate 85.83 times less return on investment than ASTRAZENECA. But when comparing it to its historical volatility, The Travelers Companies is 69.81 times less risky than ASTRAZENECA. It trades about 0.07 of its potential returns per unit of risk. ASTRAZENECA PLC 4 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,946  in ASTRAZENECA PLC 4 on December 2, 2024 and sell it today you would lose (323.00) from holding ASTRAZENECA PLC 4 or give up 3.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.45%
Values	Daily Returns

The Travelers Companies  vs.  ASTRAZENECA PLC 4

The Travelers Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Travelers Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ASTRAZENECA PLC 4

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASTRAZENECA PLC 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ASTRAZENECA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and ASTRAZENECA

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

The idea behind The Travelers Companies and ASTRAZENECA PLC 4 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.