Correlation Between Airbnb and Booking Holdings

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

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

Diversification Opportunities for Airbnb and Booking Holdings

0.63

Correlation Coefficient

Airbnb  Booking Holdings

Poor diversification

The 3 months correlation between Airbnb and Booking is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Airbnb Inc and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings and Airbnb 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 are associated (or correlated) with Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Airbnb i.e., Airbnb and Booking Holdings go up and down completely randomly.

Pair Corralation between Airbnb and Booking Holdings

Given the investment horizon of 90 days Airbnb Inc is expected to generate 1.55 times more return on investment than Booking Holdings. However, Airbnb is 1.55 times more volatile than Booking Holdings. It trades about -0.01 of its potential returns per unit of risk. Booking Holdings is currently generating about -0.05 per unit of risk. If you would invest  13,181  in Airbnb Inc on December 29, 2024 and sell it today you would lose (616.00) from holding Airbnb Inc or give up 4.67% of portfolio value over 90 days.

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

Airbnb Inc  vs.  Booking Holdings

Airbnb Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Airbnb Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Airbnb is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Booking Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Booking Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Airbnb and Booking Holdings

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

The idea behind Airbnb Inc and Booking Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.