Correlation Between Travelers Companies and Financial Select
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Financial Select 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 Financial Select 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 Financial Select Sector, you can compare the effects of market volatilities on Travelers Companies and Financial Select 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 Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Financial Select.
Diversification Opportunities for Travelers Companies and Financial Select
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Travelers and Financial is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector 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 Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of Travelers Companies i.e., Travelers Companies and Financial Select go up and down completely randomly.
Pair Corralation between Travelers Companies and Financial Select
Considering the 90-day investment horizon The Travelers Companies is expected to generate 1.65 times more return on investment than Financial Select. However, Travelers Companies is 1.65 times more volatile than Financial Select Sector. It trades about 0.12 of its potential returns per unit of risk. Financial Select Sector is currently generating about 0.17 per unit of risk. If you would invest 17,716 in The Travelers Companies on August 26, 2024 and sell it today you would earn a total of 8,531 from holding The Travelers Companies or generate 48.15% 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. Financial Select Sector
Performance |
| Timeline |
| The Travelers Companies |
| Financial Select Sector |
Travelers Companies and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Financial Select
The main advantage of trading using opposite Travelers Companies and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Financial Select 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 Financial Select will offset losses from the drop in Financial Select's long position.| Travelers Companies vs. Fiverr International | Travelers Companies vs. Pinterest | Travelers Companies vs. Upstart Holdings | Travelers Companies vs. Fastly Inc |
| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
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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