Correlation Between Travelers Companies and Western Asset

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

Diversification Opportunities for Travelers Companies and Western Asset

0.71

Correlation Coefficient

Travelers Companies  Western Asset

Poor diversification

The 3 months correlation between Travelers and Western is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Total has no effect on the direction of Travelers Companies i.e., Travelers Companies and Western Asset go up and down completely randomly.

Pair Corralation between Travelers Companies and Western Asset

Considering the 90-day investment horizon The Travelers Companies is expected to generate 4.53 times more return on investment than Western Asset. However, Travelers Companies is 4.53 times more volatile than Western Asset Total. It trades about 0.11 of its potential returns per unit of risk. Western Asset Total is currently generating about 0.15 per unit of risk. If you would invest  24,043  in The Travelers Companies on December 27, 2024 and sell it today you would earn a total of  2,183  from holding The Travelers Companies or generate 9.08% return on investment over 90 days.

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

The Travelers Companies  vs.  Western Asset Total

The Travelers Companies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Travelers Companies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Asset Total

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Total are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Western Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Travelers Companies and Western Asset

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

The idea behind The Travelers Companies and Western Asset Total 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.