Correlation Between AIRBNB INC and TRAVEL +

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

By analyzing existing cross correlation between AIRBNB INC DL 01 and TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on AIRBNB INC and TRAVEL + 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 AIRBNB INC with a short position of TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIRBNB INC and TRAVEL +.

Diversification Opportunities for AIRBNB INC and TRAVEL +

0.78

Correlation Coefficient

AIRBNB INC  TRAVEL +

Poor diversification

The 3 months correlation between AIRBNB and TRAVEL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding AIRBNB INC DL 01 and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL and AIRBNB INC 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 AIRBNB INC DL 01 are associated (or correlated) with TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of AIRBNB INC i.e., AIRBNB INC and TRAVEL + go up and down completely randomly.

Pair Corralation between AIRBNB INC and TRAVEL +

Assuming the 90 days horizon AIRBNB INC DL 01 is expected to generate 1.61 times more return on investment than TRAVEL +. However, AIRBNB INC is 1.61 times more volatile than TRAVEL LEISURE DL 01. It trades about -0.02 of its potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about -0.05 per unit of risk. If you would invest  12,572  in AIRBNB INC DL 01 on December 29, 2024 and sell it today you would lose (892.00) from holding AIRBNB INC DL 01 or give up 7.1% of portfolio value over 90 days.

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

AIRBNB INC DL 01  vs.  TRAVEL LEISURE DL 01

AIRBNB INC DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIRBNB INC DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AIRBNB INC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TRAVEL LEISURE DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TRAVEL + is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AIRBNB INC and TRAVEL +

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

The idea behind AIRBNB INC DL 01 and TRAVEL LEISURE DL 01 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.