Correlation Between Travelers Companies and First Trust
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and First Trust 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 First Trust 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 First Trust Bloomberg, you can compare the effects of market volatilities on Travelers Companies and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and First Trust.
Diversification Opportunities for Travelers Companies and First Trust
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Travelers and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and First Trust Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Bloomberg 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Bloomberg has no effect on the direction of Travelers Companies i.e., Travelers Companies and First Trust go up and down completely randomly.
Pair Corralation between Travelers Companies and First Trust
Considering the 90-day investment horizon The Travelers Companies is expected to generate 2.52 times more return on investment than First Trust. However, Travelers Companies is 2.52 times more volatile than First Trust Bloomberg. It trades about 0.13 of its potential returns per unit of risk. First Trust Bloomberg is currently generating about 0.17 per unit of risk. If you would invest 20,839 in The Travelers Companies on September 1, 2024 and sell it today you would earn a total of 5,765 from holding The Travelers Companies or generate 27.66% 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. First Trust Bloomberg
Performance |
| Timeline |
| The Travelers Companies |
| First Trust Bloomberg |
Travelers Companies and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and First Trust
The main advantage of trading using opposite Travelers Companies and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Travelers Companies vs. Selective Insurance Group | Travelers Companies vs. Aquagold International | Travelers Companies vs. Thrivent High Yield | Travelers Companies vs. Morningstar Unconstrained Allocation |
| First Trust vs. Vanguard Total Stock | First Trust vs. SPDR SP 500 | First Trust vs. iShares Core SP | First Trust vs. Vanguard Dividend Appreciation |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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