Correlation Between Travelers Companies and Cref Inflation-linked
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Cref Inflation-linked 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 Cref Inflation-linked 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 Cref Inflation Linked Bond, you can compare the effects of market volatilities on Travelers Companies and Cref Inflation-linked 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 Cref Inflation-linked. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Cref Inflation-linked.
Diversification Opportunities for Travelers Companies and Cref Inflation-linked
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Travelers and Cref is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Cref Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Inflation Linked 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 Cref Inflation-linked. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Inflation Linked has no effect on the direction of Travelers Companies i.e., Travelers Companies and Cref Inflation-linked go up and down completely randomly.
Pair Corralation between Travelers Companies and Cref Inflation-linked
Considering the 90-day investment horizon Travelers Companies is expected to generate 3.86 times less return on investment than Cref Inflation-linked. In addition to that, Travelers Companies is 7.42 times more volatile than Cref Inflation Linked Bond. It trades about 0.01 of its total potential returns per unit of risk. Cref Inflation Linked Bond is currently generating about 0.35 per unit of volatility. If you would invest 8,572 in Cref Inflation Linked Bond on November 29, 2024 and sell it today you would earn a total of 108.00 from holding Cref Inflation Linked Bond or generate 1.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Travelers Companies vs. Cref Inflation Linked Bond
Performance |
| Timeline |
| The Travelers Companies |
| Cref Inflation Linked |
Travelers Companies and Cref Inflation-linked Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Cref Inflation-linked
The main advantage of trading using opposite Travelers Companies and Cref Inflation-linked positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Cref Inflation-linked 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 Cref Inflation-linked will offset losses from the drop in Cref Inflation-linked's long position.| Travelers Companies vs. Progressive Corp | Travelers Companies vs. Chubb | Travelers Companies vs. Cincinnati Financial | Travelers Companies vs. W R Berkley |
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