Correlation Between Travelers Companies and Fundamental Income

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Fundamental Income 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 Fundamental Income 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 Fundamental Income Net, you can compare the effects of market volatilities on Travelers Companies and Fundamental Income 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 Fundamental Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Fundamental Income.

Diversification Opportunities for Travelers Companies and Fundamental Income

0.75

Correlation Coefficient

Travelers Companies  Fundamental Income

Poor diversification

The 3 months correlation between Travelers and Fundamental is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Fundamental Income Net in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Income Net 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 Fundamental Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Income Net has no effect on the direction of Travelers Companies i.e., Travelers Companies and Fundamental Income go up and down completely randomly.

Pair Corralation between Travelers Companies and Fundamental Income

Considering the 90-day investment horizon The Travelers Companies is expected to generate 1.31 times more return on investment than Fundamental Income. However, Travelers Companies is 1.31 times more volatile than Fundamental Income Net. It trades about -0.01 of its potential returns per unit of risk. Fundamental Income Net is currently generating about -0.09 per unit of risk. If you would invest  26,179  in The Travelers Companies on January 27, 2025 and sell it today you would lose (263.00) from holding The Travelers Companies or give up 1.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

The Travelers Companies  vs.  Fundamental Income Net

The Travelers Companies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fundamental Income Net

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Income Net has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fundamental Income is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Travelers Companies and Fundamental Income

The main advantage of trading using opposite Travelers Companies and Fundamental Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Fundamental Income 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 Fundamental Income will offset losses from the drop in Fundamental Income's long position.

The idea behind The Travelers Companies and Fundamental Income Net pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.