Correlation Between Global and Travelers Companies

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

By analyzing existing cross correlation between Global Marine 7 and The Travelers Companies, you can compare the effects of market volatilities on Global and Travelers Companies 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 Global with a short position of Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global and Travelers Companies.

Diversification Opportunities for Global and Travelers Companies

-0.84

Correlation Coefficient

Global  Travelers Companies

Pay attention - limited upside

The 3 months correlation between Global and Travelers is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Global Marine 7 and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies and Global 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 Global Marine 7 are associated (or correlated) with Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Global i.e., Global and Travelers Companies go up and down completely randomly.

Pair Corralation between Global and Travelers Companies

Assuming the 90 days trading horizon Global Marine 7 is expected to under-perform the Travelers Companies. In addition to that, Global is 1.2 times more volatile than The Travelers Companies. It trades about -0.12 of its total potential returns per unit of risk. The Travelers Companies is currently generating about 0.12 per unit of volatility. If you would invest  24,089  in The Travelers Companies on December 2, 2024 and sell it today you would earn a total of  1,760  from holding The Travelers Companies or generate 7.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Global Marine 7  vs.  The Travelers Companies

Global Marine 7

Risk-Adjusted Performance

Weak

Over the last 90 days Global Marine 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Global Marine 7 investors.

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.

Pair Trading with Global and Travelers Companies

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

The idea behind Global Marine 7 and The Travelers Companies 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.