Correlation Between Travelers Companies and MORGAN

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and MORGAN 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 MORGAN 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 MORGAN STANLEY 43, you can compare the effects of market volatilities on Travelers Companies and MORGAN 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 MORGAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and MORGAN.

Diversification Opportunities for Travelers Companies and MORGAN

0.8

Correlation Coefficient

Travelers Companies  MORGAN

Very poor diversification

The 3 months correlation between Travelers and MORGAN is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and MORGAN STANLEY 43 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MORGAN STANLEY 43 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 MORGAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MORGAN STANLEY 43 has no effect on the direction of Travelers Companies i.e., Travelers Companies and MORGAN go up and down completely randomly.

Pair Corralation between Travelers Companies and MORGAN

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the MORGAN. In addition to that, Travelers Companies is 1.97 times more volatile than MORGAN STANLEY 43. It trades about -0.07 of its total potential returns per unit of risk. MORGAN STANLEY 43 is currently generating about -0.04 per unit of volatility. If you would invest  8,802  in MORGAN STANLEY 43 on November 29, 2024 and sell it today you would lose (173.00) from holding MORGAN STANLEY 43 or give up 1.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

The Travelers Companies  vs.  MORGAN STANLEY 43

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.

MORGAN STANLEY 43

Risk-Adjusted Performance

Very Weak

Over the last 90 days MORGAN STANLEY 43 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MORGAN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and MORGAN

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

The idea behind The Travelers Companies and MORGAN STANLEY 43 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.