Correlation Between Travelers Companies and Tokio Marine

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

Diversification Opportunities for Travelers Companies and Tokio Marine

0.73

Correlation Coefficient

Travelers Companies  Tokio Marine

Poor diversification

The 3 months correlation between Travelers and Tokio is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings 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 Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of Travelers Companies i.e., Travelers Companies and Tokio Marine go up and down completely randomly.

Pair Corralation between Travelers Companies and Tokio Marine

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the Tokio Marine. But the stock apears to be less risky and, when comparing its historical volatility, The Travelers Companies is 2.69 times less risky than Tokio Marine. The stock trades about -0.17 of its potential returns per unit of risk. The Tokio Marine Holdings is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,555  in Tokio Marine Holdings on January 9, 2025 and sell it today you would lose (275.00) from holding Tokio Marine Holdings or give up 7.74% 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.  Tokio Marine Holdings

The Travelers Companies

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 2 (%) 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.

Tokio Marine Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokio Marine Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Tokio Marine may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Travelers Companies and Tokio Marine

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

The idea behind The Travelers Companies and Tokio Marine Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.