Correlation Between Travelers Companies and Industrial Select
Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Industrial 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 Industrial 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 Industrial Select Sector, you can compare the effects of market volatilities on Travelers Companies and Industrial 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 Industrial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Industrial Select.
Diversification Opportunities for Travelers Companies and Industrial Select
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Travelers and Industrial is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Industrial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial 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 Industrial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Select Sector has no effect on the direction of Travelers Companies i.e., Travelers Companies and Industrial Select go up and down completely randomly.
Pair Corralation between Travelers Companies and Industrial Select
Considering the 90-day investment horizon The Travelers Companies is expected to generate 1.06 times more return on investment than Industrial Select. However, Travelers Companies is 1.06 times more volatile than Industrial Select Sector. It trades about 0.26 of its potential returns per unit of risk. Industrial Select Sector is currently generating about 0.21 per unit of risk. If you would invest 24,867 in The Travelers Companies on August 30, 2024 and sell it today you would earn a total of 1,799 from holding The Travelers Companies or generate 7.23% 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. Industrial Select Sector
Performance |
| Timeline |
| The Travelers Companies |
| Industrial Select Sector |
Travelers Companies and Industrial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Industrial Select
The main advantage of trading using opposite Travelers Companies and Industrial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Industrial 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 Industrial Select will offset losses from the drop in Industrial Select's long position.| Travelers Companies vs. Axa Equitable Holdings | Travelers Companies vs. American International Group | Travelers Companies vs. Arch Capital Group | Travelers Companies vs. Sun Life Financial |
| Industrial Select vs. Materials Select Sector | Industrial Select vs. Consumer Discretionary Select | Industrial Select vs. Consumer Staples Select | Industrial Select vs. Health Care Select |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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