Correlation Between Travelers Companies and Rafarma Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Rafarma Pharmaceuticals 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 Rafarma Pharmaceuticals 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 Rafarma Pharmaceuticals, you can compare the effects of market volatilities on Travelers Companies and Rafarma Pharmaceuticals 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 Rafarma Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Rafarma Pharmaceuticals.
Diversification Opportunities for Travelers Companies and Rafarma Pharmaceuticals
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Travelers and Rafarma is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Rafarma Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rafarma Pharmaceuticals 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 Rafarma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rafarma Pharmaceuticals has no effect on the direction of Travelers Companies i.e., Travelers Companies and Rafarma Pharmaceuticals go up and down completely randomly.
Pair Corralation between Travelers Companies and Rafarma Pharmaceuticals
Considering the 90-day investment horizon Travelers Companies is expected to generate 5.2 times less return on investment than Rafarma Pharmaceuticals. But when comparing it to its historical volatility, The Travelers Companies is 9.3 times less risky than Rafarma Pharmaceuticals. It trades about 0.13 of its potential returns per unit of risk. Rafarma Pharmaceuticals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9.00 in Rafarma Pharmaceuticals on September 3, 2024 and sell it today you would lose (0.13) from holding Rafarma Pharmaceuticals or give up 1.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Travelers Companies vs. Rafarma Pharmaceuticals
Performance |
| Timeline |
| The Travelers Companies |
| Rafarma Pharmaceuticals |
Travelers Companies and Rafarma Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Rafarma Pharmaceuticals
The main advantage of trading using opposite Travelers Companies and Rafarma Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Rafarma Pharmaceuticals 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 Rafarma Pharmaceuticals will offset losses from the drop in Rafarma Pharmaceuticals' long position.| Travelers Companies vs. SPACE | Travelers Companies vs. Ampleforth | Travelers Companies vs. ionet | Travelers Companies vs. KIN |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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