Correlation Between Boeing and Travelers Companies

Can any of the company-specific risk be diversified away by investing in both Boeing and Travelers Companies 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 Boeing and Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Boeing and The Travelers Companies, you can compare the effects of market volatilities on Boeing and Travelers Companies 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 Boeing with a short position of Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Travelers Companies.

Diversification Opportunities for Boeing and Travelers Companies

-0.49

Correlation Coefficient

Boeing  Travelers Companies

Very good diversification

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

Pair Corralation between Boeing and Travelers Companies

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Travelers Companies. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.66 times less risky than Travelers Companies. The stock trades about -0.49 of its potential returns per unit of risk. The The Travelers Companies is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  22,553  in The Travelers Companies on January 24, 2024 and sell it today you would lose (1,121) from holding The Travelers Companies or give up 4.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Boeing  vs.  The Travelers Companies

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

The Travelers Companies

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Boeing and Travelers Companies

The main advantage of trading using opposite Boeing and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.

The idea behind The Boeing and The Travelers Companies 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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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 the Transaction History module to view history of all your transactions and understand their impact on performance.