Correlation Between TRON and TRAVELERS

Can any of the company-specific risk be diversified away by investing in both TRON and TRAVELERS 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 TRON and TRAVELERS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TRON and TRAVELERS INC 405, you can compare the effects of market volatilities on TRON and TRAVELERS 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 TRON with a short position of TRAVELERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRON and TRAVELERS.

Diversification Opportunities for TRON and TRAVELERS

-0.51

Correlation Coefficient

TRON  TRAVELERS

Excellent diversification

The 3 months correlation between TRON and TRAVELERS is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding TRON and TRAVELERS INC 405 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVELERS INC 405 and TRON 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 TRON are associated (or correlated) with TRAVELERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVELERS INC 405 has no effect on the direction of TRON i.e., TRON and TRAVELERS go up and down completely randomly.

Pair Corralation between TRON and TRAVELERS

Assuming the 90 days trading horizon TRON is expected to under-perform the TRAVELERS. In addition to that, TRON is 1.0 times more volatile than TRAVELERS INC 405. It trades about -0.08 of its total potential returns per unit of risk. TRAVELERS INC 405 is currently generating about -0.03 per unit of volatility. If you would invest  8,051  in TRAVELERS INC 405 on October 23, 2024 and sell it today you would lose (155.00) from holding TRAVELERS INC 405 or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

TRON  vs.  TRAVELERS INC 405

TRON

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

TRAVELERS INC 405

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVELERS INC 405 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TRAVELERS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRON and TRAVELERS

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

The idea behind TRON and TRAVELERS INC 405 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.