Correlation Between Travelers Companies and Workday

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

Diversification Opportunities for Travelers Companies and Workday

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Travelers and Workday is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Workday in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workday 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 Workday. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workday has no effect on the direction of Travelers Companies i.e., Travelers Companies and Workday go up and down completely randomly.

Pair Corralation between Travelers Companies and Workday

Considering the 90-day investment horizon The Travelers Companies is expected to generate 0.6 times more return on investment than Workday. However, The Travelers Companies is 1.65 times less risky than Workday. It trades about 0.08 of its potential returns per unit of risk. Workday is currently generating about -0.01 per unit of risk. If you would invest  10,598  in The Travelers Companies on May 20, 2022 and sell it today you would earn a total of  6,813  from holding The Travelers Companies or generate 64.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Travelers Companies  vs.  Workday

 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

Workday 
Workday Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Workday are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Workday may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Workday Price Channel

Travelers Companies and Workday Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Travelers Companies and Workday

The main advantage of trading using opposite Travelers Companies and Workday positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Workday 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 Workday will offset losses from the drop in Workday's long position.
The idea behind The Travelers Companies and Workday 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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