Correlation Between Travelers Companies and Invesco RAFI
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Invesco RAFI 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 Invesco RAFI 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 Invesco RAFI Strategic, you can compare the effects of market volatilities on Travelers Companies and Invesco RAFI 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 Invesco RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Invesco RAFI.
Diversification Opportunities for Travelers Companies and Invesco RAFI
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Travelers and Invesco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Invesco RAFI Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco RAFI Strategic 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 Invesco RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco RAFI Strategic has no effect on the direction of Travelers Companies i.e., Travelers Companies and Invesco RAFI go up and down completely randomly.
Pair Corralation between Travelers Companies and Invesco RAFI
Considering the 90-day investment horizon The Travelers Companies is expected to generate 2.62 times more return on investment than Invesco RAFI. However, Travelers Companies is 2.62 times more volatile than Invesco RAFI Strategic. It trades about 0.15 of its potential returns per unit of risk. Invesco RAFI Strategic is currently generating about 0.16 per unit of risk. If you would invest 22,342 in The Travelers Companies on August 28, 2024 and sell it today you would earn a total of 3,780 from holding The Travelers Companies or generate 16.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Travelers Companies vs. Invesco RAFI Strategic
Performance |
| Timeline |
| The Travelers Companies |
| Invesco RAFI Strategic |
Travelers Companies and Invesco RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Invesco RAFI
The main advantage of trading using opposite Travelers Companies and Invesco RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Invesco RAFI 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 Invesco RAFI will offset losses from the drop in Invesco RAFI's long position.| Travelers Companies vs. Fiverr International | Travelers Companies vs. Pinterest | Travelers Companies vs. Upstart Holdings | Travelers Companies vs. Fastly Inc |
| Invesco RAFI vs. Invesco International BuyBack | Invesco RAFI vs. Invesco Variable Rate | Invesco RAFI vs. First Trust Small | Invesco RAFI vs. First Trust Multi |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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