Correlation Between Travelers Companies and US Bancorp

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

Diversification Opportunities for Travelers Companies and US Bancorp

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Travelers and US Bancorp is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Travelers Companies i.e., Travelers Companies and US Bancorp go up and down completely randomly.

Pair Corralation between Travelers Companies and US Bancorp

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.8 times more return on investment than US Bancorp. However, The Travelers Companies is 1.26 times less risky than US Bancorp. It trades about 0.07 of its potential returns per unit of risk. US Bancorp is currently generating about 0.05 per unit of risk. If you would invest  11,183  in The Travelers Companies on May 19, 2022 and sell it today you would earn a total of  6,232  from holding The Travelers Companies or generate 55.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

The Travelers Companies  vs.  US Bancorp

 Performance (%) 
       Timeline  
The Travelers Companies 
Travelers Performance
2 of 100
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.

Travelers Price Channel

US Bancorp 
US Bancorp Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, US Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

US Bancorp Price Channel

Travelers Companies and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Travelers Companies and US Bancorp

The main advantage of trading using opposite Travelers Companies and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.
The idea behind The Travelers Companies and US Bancorp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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