Correlation Between Travelers Companies and Compass Group
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Compass Group 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 Companies and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Travelers Companies and Compass Group PLC, you can compare the effects of market volatilities on Travelers Companies and Compass Group 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 Companies with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Compass Group.
Diversification Opportunities for Travelers Companies and Compass Group
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Travelers and Compass is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Travelers Companies 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 The Travelers Companies are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Travelers Companies i.e., Travelers Companies and Compass Group go up and down completely randomly.
Pair Corralation between Travelers Companies and Compass Group
Considering the 90-day investment horizon Travelers Companies is expected to generate 1.27 times less return on investment than Compass Group. But when comparing it to its historical volatility, The Travelers Companies is 1.3 times less risky than Compass Group. It trades about 0.06 of its potential returns per unit of risk. Compass Group PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,231 in Compass Group PLC on August 24, 2024 and sell it today you would earn a total of 1,136 from holding Compass Group PLC or generate 50.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.11% |
| Values | Daily Returns |
The Travelers Companies vs. Compass Group PLC
Performance |
| Timeline |
| The Travelers Companies |
| Compass Group PLC |
Travelers Companies and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Compass Group
The main advantage of trading using opposite Travelers Companies and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group's long position.| Travelers Companies vs. Amtech Systems | Travelers Companies vs. Gold Fields Ltd | Travelers Companies vs. Aegean Airlines SA | Travelers Companies vs. Merck Company |
| Compass Group vs. Alsea SAB de | Compass Group vs. Marstons PLC | Compass Group vs. Marstons PLC | Compass Group vs. Spot Coffee |
Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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