Correlation Between Booking Holdings and Alien Metals

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

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

Diversification Opportunities for Booking Holdings and Alien Metals

-0.48

Correlation Coefficient

Booking Holdings  Alien Metals

Very good diversification

The 3 months correlation between Booking and Alien is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Booking Holdings and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals and Booking Holdings 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 Booking Holdings are associated (or correlated) with Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of Booking Holdings i.e., Booking Holdings and Alien Metals go up and down completely randomly.

Pair Corralation between Booking Holdings and Alien Metals

Assuming the 90 days trading horizon Booking Holdings is expected to generate 0.51 times more return on investment than Alien Metals. However, Booking Holdings is 1.95 times less risky than Alien Metals. It trades about -0.25 of its potential returns per unit of risk. Alien Metals is currently generating about -0.14 per unit of risk. If you would invest  516,643  in Booking Holdings on October 8, 2024 and sell it today you would lose (25,401) from holding Booking Holdings or give up 4.92% of portfolio value over 90 days.

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

Booking Holdings  vs.  Alien Metals

Booking Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Booking Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alien Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alien Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Booking Holdings and Alien Metals

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

The idea behind Booking Holdings and Alien Metals 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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.