Correlation Between Travelers Companies and CONSOLIDATED

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

Diversification Opportunities for Travelers Companies and CONSOLIDATED

-0.2

Correlation Coefficient

Travelers Companies  CONSOLIDATED

Good diversification

The 3 months correlation between Travelers and CONSOLIDATED is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and CONSOLIDATED EDISON N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOLIDATED EDISON 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 CONSOLIDATED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOLIDATED EDISON has no effect on the direction of Travelers Companies i.e., Travelers Companies and CONSOLIDATED go up and down completely randomly.

Pair Corralation between Travelers Companies and CONSOLIDATED

Considering the 90-day investment horizon The Travelers Companies is expected to generate 1.71 times more return on investment than CONSOLIDATED. However, Travelers Companies is 1.71 times more volatile than CONSOLIDATED EDISON N. It trades about 0.05 of its potential returns per unit of risk. CONSOLIDATED EDISON N is currently generating about 0.03 per unit of risk. If you would invest  17,762  in The Travelers Companies on October 7, 2024 and sell it today you would earn a total of  6,467  from holding The Travelers Companies or generate 36.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.62%
Values	Daily Returns

The Travelers Companies  vs.  CONSOLIDATED EDISON N

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.

CONSOLIDATED EDISON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CONSOLIDATED 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 CONSOLIDATED

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

The idea behind The Travelers Companies and CONSOLIDATED EDISON N 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.