Correlation Between Travelers Companies and KROGER

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and KROGER 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 KROGER 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 KROGER 75 percent, you can compare the effects of market volatilities on Travelers Companies and KROGER 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 KROGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and KROGER.

Diversification Opportunities for Travelers Companies and KROGER

-0.59

Correlation Coefficient

Travelers Companies  KROGER

Excellent diversification

The 3 months correlation between Travelers and KROGER is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and KROGER 75 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KROGER 75 percent 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 KROGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KROGER 75 percent has no effect on the direction of Travelers Companies i.e., Travelers Companies and KROGER go up and down completely randomly.

Pair Corralation between Travelers Companies and KROGER

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the KROGER. In addition to that, Travelers Companies is 1.92 times more volatile than KROGER 75 percent. It trades about -0.15 of its total potential returns per unit of risk. KROGER 75 percent is currently generating about -0.04 per unit of volatility. If you would invest  11,379  in KROGER 75 percent on September 12, 2024 and sell it today you would lose (51.00) from holding KROGER 75 percent or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.27%
Values	Daily Returns

The Travelers Companies  vs.  KROGER 75 percent

The Travelers Companies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

KROGER 75 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KROGER 75 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KROGER 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 KROGER

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

The idea behind The Travelers Companies and KROGER 75 percent 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.