Correlation Between Travelers Companies and 26885BAE0

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and 26885BAE0 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 26885BAE0 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 EQM Midstream Partners, you can compare the effects of market volatilities on Travelers Companies and 26885BAE0 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 26885BAE0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and 26885BAE0.

Diversification Opportunities for Travelers Companies and 26885BAE0

-0.42

Correlation Coefficient

Travelers Companies  26885BAE0

Very good diversification

The 3 months correlation between Travelers and 26885BAE0 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and EQM Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQM Midstream Partners 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 26885BAE0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQM Midstream Partners has no effect on the direction of Travelers Companies i.e., Travelers Companies and 26885BAE0 go up and down completely randomly.

Pair Corralation between Travelers Companies and 26885BAE0

Considering the 90-day investment horizon The Travelers Companies is expected to generate 1.0 times more return on investment than 26885BAE0. However, The Travelers Companies is 1.0 times less risky than 26885BAE0. It trades about 0.29 of its potential returns per unit of risk. EQM Midstream Partners is currently generating about 0.14 per unit of risk. If you would invest  24,281  in The Travelers Companies on September 4, 2024 and sell it today you would earn a total of  1,778  from holding The Travelers Companies or generate 7.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

The Travelers Companies  vs.  EQM Midstream Partners

The Travelers Companies

Risk-Adjusted Performance

9 of 100

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 weak basic indicators, Travelers Companies showed solid returns over the last few months and may actually be approaching a breakup point.

EQM Midstream Partners

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EQM Midstream Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 26885BAE0 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and 26885BAE0

The main advantage of trading using opposite Travelers Companies and 26885BAE0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, 26885BAE0 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 26885BAE0 will offset losses from the drop in 26885BAE0's long position.

The idea behind The Travelers Companies and EQM Midstream Partners 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.