Correlation Between TRAVELERS and Allegheny Technologies

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

By analyzing existing cross correlation between TRAVELERS INC 4 and Allegheny Technologies Incorporated, you can compare the effects of market volatilities on TRAVELERS and Allegheny Technologies 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 with a short position of Allegheny Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVELERS and Allegheny Technologies.

Diversification Opportunities for TRAVELERS and Allegheny Technologies

-0.37

Correlation Coefficient

TRAVELERS  Allegheny Technologies

Very good diversification

The 3 months correlation between TRAVELERS and Allegheny is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding TRAVELERS INC 4 and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies and TRAVELERS 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 TRAVELERS INC 4 are associated (or correlated) with Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of TRAVELERS i.e., TRAVELERS and Allegheny Technologies go up and down completely randomly.

Pair Corralation between TRAVELERS and Allegheny Technologies

Assuming the 90 days trading horizon TRAVELERS INC 4 is expected to generate 0.47 times more return on investment than Allegheny Technologies. However, TRAVELERS INC 4 is 2.14 times less risky than Allegheny Technologies. It trades about 0.09 of its potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about -0.03 per unit of risk. If you would invest  7,981  in TRAVELERS INC 4 on December 30, 2024 and sell it today you would earn a total of  368.00  from holding TRAVELERS INC 4 or generate 4.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.58%
Values	Daily Returns

TRAVELERS INC 4  vs.  Allegheny Technologies Incorpo

TRAVELERS INC 4

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVELERS INC 4 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TRAVELERS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Allegheny Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allegheny Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Allegheny Technologies is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with TRAVELERS and Allegheny Technologies

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

The idea behind TRAVELERS INC 4 and Allegheny Technologies Incorporated 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.