Correlation Between Travelers Companies and Apple

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

Diversification Opportunities for Travelers Companies and Apple

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between Travelers and Apple is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Travelers Companies i.e., Travelers Companies and Apple go up and down completely randomly.

Pair Corralation between Travelers Companies and Apple

Considering the 90-day investment horizon Travelers Companies is expected to generate 6.01 times less return on investment than Apple. But when comparing it to its historical volatility, The Travelers Companies is 1.08 times less risky than Apple. It trades about 0.06 of its potential returns per unit of risk. Apple Inc is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  13,524  in Apple Inc on May 16, 2022 and sell it today you would earn a total of  3,686  from holding Apple Inc or generate 27.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

The Travelers Companies  vs.  Apple Inc

 Performance (%) 
       Timeline  
The Travelers Companies 
Travelers Performance
0 of 100
Over the last 90 days The Travelers Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The new stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Travelers Price Channel

Apple Inc 
Apple Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, Apple revealed solid returns over the last few months and may actually be approaching a breakup point.

Apple Price Channel

Travelers Companies and Apple Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Travelers Companies and Apple

The main advantage of trading using opposite Travelers Companies and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.
The idea behind The Travelers Companies and Apple Inc 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.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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