Correlation Between Travelers Companies and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on Travelers Companies and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Northern Lights.
Diversification Opportunities for Travelers Companies and Northern Lights
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Travelers and Northern is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Travelers Companies i.e., Travelers Companies and Northern Lights go up and down completely randomly.
Pair Corralation between Travelers Companies and Northern Lights
Considering the 90-day investment horizon The Travelers Companies is expected to generate 3.3 times more return on investment than Northern Lights. However, Travelers Companies is 3.3 times more volatile than Northern Lights. It trades about 0.18 of its potential returns per unit of risk. Northern Lights is currently generating about -0.05 per unit of risk. If you would invest 25,050 in The Travelers Companies on August 26, 2024 and sell it today you would earn a total of 1,197 from holding The Travelers Companies or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Travelers Companies vs. Northern Lights
Performance |
| Timeline |
| The Travelers Companies |
| Northern Lights |
Travelers Companies and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Northern Lights
The main advantage of trading using opposite Travelers Companies and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Travelers Companies vs. Fiverr International | Travelers Companies vs. Pinterest | Travelers Companies vs. Upstart Holdings | Travelers Companies vs. Fastly Inc |
| Northern Lights vs. Inspire SmallMid Cap | Northern Lights vs. Inspire Global Hope | Northern Lights vs. Northern Lights | Northern Lights vs. Inspire International ESG |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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