Correlation Between Travelers Companies and T REX
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and T REX 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 T REX 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 T REX 2X Long, you can compare the effects of market volatilities on Travelers Companies and T REX 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 T REX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and T REX.
Diversification Opportunities for Travelers Companies and T REX
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Travelers and TSLT is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and T REX 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T REX 2X 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 T REX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T REX 2X has no effect on the direction of Travelers Companies i.e., Travelers Companies and T REX go up and down completely randomly.
Pair Corralation between Travelers Companies and T REX
Considering the 90-day investment horizon Travelers Companies is expected to generate 9.06 times less return on investment than T REX. But when comparing it to its historical volatility, The Travelers Companies is 5.25 times less risky than T REX. It trades about 0.06 of its potential returns per unit of risk. T REX 2X Long is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,069 in T REX 2X Long on September 3, 2024 and sell it today you would earn a total of 1,839 from holding T REX 2X Long or generate 172.03% 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. T REX 2X Long
Performance |
| Timeline |
| The Travelers Companies |
| T REX 2X |
Travelers Companies and T REX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and T REX
The main advantage of trading using opposite Travelers Companies and T REX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, T REX 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 T REX will offset losses from the drop in T REX's long position.| Travelers Companies vs. SPACE | Travelers Companies vs. Ampleforth | Travelers Companies vs. ionet | Travelers Companies vs. KIN |
| T REX vs. ProShares Ultra SP500 | T REX vs. Direxion Daily SP500 | T REX vs. ProShares Ultra QQQ | T REX vs. Direxion Daily SP |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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