Correlation Between Travelers Companies and KINDER

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

Diversification Opportunities for Travelers Companies and KINDER

0.76

Correlation Coefficient

Travelers Companies  KINDER

Poor diversification

The 3 months correlation between Travelers and KINDER is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and KINDER MORGAN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN INC 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN INC has no effect on the direction of Travelers Companies i.e., Travelers Companies and KINDER go up and down completely randomly.

Pair Corralation between Travelers Companies and KINDER

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the KINDER. But the stock apears to be less risky and, when comparing its historical volatility, The Travelers Companies is 1.09 times less risky than KINDER. The stock trades about -0.09 of its potential returns per unit of risk. The KINDER MORGAN INC is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  6,868  in KINDER MORGAN INC on October 7, 2024 and sell it today you would lose (261.00) from holding KINDER MORGAN INC or give up 3.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.24%
Values	Daily Returns

The Travelers Companies  vs.  KINDER MORGAN INC

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 weak basic indicators, Travelers Companies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

KINDER MORGAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KINDER MORGAN INC investors.

Pair Trading with Travelers Companies and KINDER

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

The idea behind The Travelers Companies and KINDER MORGAN INC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.