Correlation Between Travelers Companies and Best Buy

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

Diversification Opportunities for Travelers Companies and Best Buy

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Travelers and Best Buy is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Best Buy Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Travelers Companies i.e., Travelers Companies and Best Buy go up and down completely randomly.

Pair Corralation between Travelers Companies and Best Buy

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the Best Buy. But the stock apears to be less risky and, when comparing its historical volatility, The Travelers Companies is 2.23 times less risky than Best Buy. The stock trades about -0.27 of its potential returns per unit of risk. The Best Buy Company is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  7,325  in Best Buy Company on June 27, 2022 and sell it today you would lose (447.00)  from holding Best Buy Company or give up 6.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

The Travelers Companies  vs.  Best Buy Company

 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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Travelers Price Channel

Best Buy 
Best Buy Performance
0 of 100
Over the last 90 days Best Buy Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Best Buy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Best Buy Price Channel

Travelers Companies and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Travelers Companies and Best Buy

The main advantage of trading using opposite Travelers Companies and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
The idea behind The Travelers Companies and Best Buy Company 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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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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