Correlation Between Travelers Companies and Merck
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Merck 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 Merck 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 Merck Company, you can compare the effects of market volatilities on Travelers Companies and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Merck.
Diversification Opportunities for Travelers Companies and Merck
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Travelers and Merck is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Travelers Companies i.e., Travelers Companies and Merck go up and down completely randomly.
Pair Corralation between Travelers Companies and Merck
Considering the 90-day investment horizon The Travelers Companies is expected to generate 1.11 times more return on investment than Merck. However, Travelers Companies is 1.11 times more volatile than Merck Company. It trades about 0.06 of its potential returns per unit of risk. Merck Company is currently generating about 0.0 per unit of risk. If you would invest 17,960 in The Travelers Companies on August 24, 2024 and sell it today you would earn a total of 8,287 from holding The Travelers Companies or generate 46.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Travelers Companies vs. Merck Company
Performance |
| Timeline |
| The Travelers Companies |
| Merck Company |
Travelers Companies and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Merck
The main advantage of trading using opposite Travelers Companies and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck'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 |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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