Correlation Between Travelers Companies and XXL Energy

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

Diversification Opportunities for Travelers Companies and XXL Energy

-0.43

Correlation Coefficient

Travelers Companies  XXL Energy

Very good diversification

The 3 months correlation between Travelers and XXL is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and XXL Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL Energy Corp 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 XXL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL Energy Corp has no effect on the direction of Travelers Companies i.e., Travelers Companies and XXL Energy go up and down completely randomly.

Pair Corralation between Travelers Companies and XXL Energy

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	95.45%
Values	Daily Returns

The Travelers Companies  vs.  XXL Energy Corp

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.

XXL Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Travelers Companies and XXL Energy

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

The idea behind The Travelers Companies and XXL Energy Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.