Correlation Between Travelers Companies and Walmart

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

Diversification Opportunities for Travelers Companies and Walmart

0.78

Correlation Coefficient

Travelers Companies  Walmart

Poor diversification

The 3 months correlation between Travelers and Walmart is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Travelers Companies i.e., Travelers Companies and Walmart go up and down completely randomly.

Pair Corralation between Travelers Companies and Walmart

Considering the 90-day investment horizon Travelers Companies is expected to generate 4.88 times less return on investment than Walmart. In addition to that, Travelers Companies is 1.52 times more volatile than Walmart. It trades about 0.03 of its total potential returns per unit of risk. Walmart is currently generating about 0.24 per unit of volatility. If you would invest  5,332  in Walmart on January 24, 2024 and sell it today you would earn a total of  682.00  from holding Walmart or generate 12.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

The Travelers Companies  vs.  Walmart

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.

Walmart

Risk-Adjusted Performance

18 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Travelers Companies and Walmart

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

The idea behind The Travelers Companies and Walmart 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..