Correlation Between Travelers Companies and CSLAU

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and CSLAU 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 CSLAU 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 CSLAU 425 27 APR 32, you can compare the effects of market volatilities on Travelers Companies and CSLAU 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 CSLAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and CSLAU.

Diversification Opportunities for Travelers Companies and CSLAU

0.63

Correlation Coefficient

Travelers Companies  CSLAU

Poor diversification

The 3 months correlation between Travelers and CSLAU is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and CSLAU 425 27 APR 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSLAU 425 27 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 CSLAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSLAU 425 27 has no effect on the direction of Travelers Companies i.e., Travelers Companies and CSLAU go up and down completely randomly.

Pair Corralation between Travelers Companies and CSLAU

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the CSLAU. In addition to that, Travelers Companies is 2.84 times more volatile than CSLAU 425 27 APR 32. It trades about -0.07 of its total potential returns per unit of risk. CSLAU 425 27 APR 32 is currently generating about -0.08 per unit of volatility. If you would invest  9,628  in CSLAU 425 27 APR 32 on November 29, 2024 and sell it today you would lose (135.00) from holding CSLAU 425 27 APR 32 or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	54.24%
Values	Daily Returns

The Travelers Companies  vs.  CSLAU 425 27 APR 32

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.

CSLAU 425 27

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSLAU 425 27 APR 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CSLAU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and CSLAU

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

The idea behind The Travelers Companies and CSLAU 425 27 APR 32 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.