Correlation Between TRAVELERS and MACOM Technology

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

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

Diversification Opportunities for TRAVELERS and MACOM Technology

-0.31

Correlation Coefficient

TRAVELERS  MACOM Technology

Very good diversification

The 3 months correlation between TRAVELERS and MACOM is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding TRAVELERS INC 405 and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol 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 405 are associated (or correlated) with MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of TRAVELERS i.e., TRAVELERS and MACOM Technology go up and down completely randomly.

Pair Corralation between TRAVELERS and MACOM Technology

Assuming the 90 days trading horizon TRAVELERS INC 405 is expected to generate 2.01 times more return on investment than MACOM Technology. However, TRAVELERS is 2.01 times more volatile than MACOM Technology Solutions. It trades about 0.02 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about -0.03 per unit of risk. If you would invest  8,462  in TRAVELERS INC 405 on October 10, 2024 and sell it today you would earn a total of  3.00  from holding TRAVELERS INC 405 or generate 0.04% return on investment over 90 days.

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

TRAVELERS INC 405  vs.  MACOM Technology Solutions

TRAVELERS INC 405

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVELERS INC 405 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TRAVELERS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

MACOM Technology Sol

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAVELERS and MACOM Technology

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

The idea behind TRAVELERS INC 405 and MACOM Technology Solutions 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.