Correlation Between Travelers Companies and Vanguard
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on Travelers Companies and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Vanguard.
Diversification Opportunities for Travelers Companies and Vanguard
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Travelers and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Travelers Companies i.e., Travelers Companies and Vanguard go up and down completely randomly.
Pair Corralation between Travelers Companies and Vanguard
Considering the 90-day investment horizon The Travelers Companies is expected to generate 2.76 times more return on investment than Vanguard. However, Travelers Companies is 2.76 times more volatile than Vanguard SP 500. It trades about 0.16 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.16 per unit of risk. If you would invest 22,688 in The Travelers Companies on August 31, 2024 and sell it today you would earn a total of 3,978 from holding The Travelers Companies or generate 17.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Travelers Companies vs. Vanguard SP 500
Performance |
| Timeline |
| The Travelers Companies |
| Vanguard SP 500 |
Travelers Companies and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Vanguard
The main advantage of trading using opposite Travelers Companies and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| Travelers Companies vs. Progressive Corp | Travelers Companies vs. Chubb | Travelers Companies vs. The Allstate | Travelers Companies vs. Selective Insurance Group |
| Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard Russell 1000 | Vanguard vs. Vanguard Mega Cap | Vanguard vs. Vanguard Russell 1000 |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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