Correlation Between Travelers Companies and American Express

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

Diversification Opportunities for Travelers Companies and American Express

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Travelers and American is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Travelers Companies i.e., Travelers Companies and American Express go up and down completely randomly.

Pair Corralation between Travelers Companies and American Express

Considering the 90-day investment horizon Travelers Companies is expected to generate 1.22 times less return on investment than American Express. But when comparing it to its historical volatility, The Travelers Companies is 1.48 times less risky than American Express. It trades about 0.07 of its potential returns per unit of risk. American Express is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,002  in American Express on May 20, 2022 and sell it today you would earn a total of  6,422  from holding American Express or generate 64.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Travelers Companies  vs.  American Express

 Performance (%) 
       Timeline  
The Travelers Companies 
Travelers Performance
3 of 100
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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Travelers Price Channel

American Express 
American Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in September 2022.

American Price Channel

Travelers Companies and American Express Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Travelers Companies and American Express

The main advantage of trading using opposite Travelers Companies and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.
The idea behind The Travelers Companies and American Express 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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