Correlation Between TRAVELERS and United Guardian

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

By analyzing existing cross correlation between TRAVELERS PPTY CAS and United Guardian, you can compare the effects of market volatilities on TRAVELERS and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVELERS and United Guardian.

Diversification Opportunities for TRAVELERS and United Guardian

-0.37

Correlation Coefficient

TRAVELERS  United Guardian

Very good diversification

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

Pair Corralation between TRAVELERS and United Guardian

Assuming the 90 days trading horizon TRAVELERS is expected to generate 5.45 times less return on investment than United Guardian. But when comparing it to its historical volatility, TRAVELERS PPTY CAS is 2.22 times less risky than United Guardian. It trades about 0.16 of its potential returns per unit of risk. United Guardian is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  965.00  in United Guardian on October 25, 2024 and sell it today you would earn a total of  115.00  from holding United Guardian or generate 11.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

TRAVELERS PPTY CAS  vs.  United Guardian

TRAVELERS PPTY CAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRAVELERS PPTY CAS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TRAVELERS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TRAVELERS and United Guardian

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

The idea behind TRAVELERS PPTY CAS and United Guardian 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.