Correlation Between Trip Group and BANDAI NAMCO

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

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

Diversification Opportunities for Trip Group and BANDAI NAMCO

0.73

Correlation Coefficient

Trip Group  BANDAI NAMCO

Poor diversification

The 3 months correlation between Trip and BANDAI is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Trip Group Limited and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings and Trip Group 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 Trip Group Limited are associated (or correlated) with BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of Trip Group i.e., Trip Group and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between Trip Group and BANDAI NAMCO

Assuming the 90 days horizon Trip Group is expected to generate 1.7 times less return on investment than BANDAI NAMCO. But when comparing it to its historical volatility, Trip Group Limited is 2.54 times less risky than BANDAI NAMCO. It trades about 0.11 of its potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  841.00  in BANDAI NAMCO Holdings on September 25, 2024 and sell it today you would earn a total of  1,455  from holding BANDAI NAMCO Holdings or generate 173.01% return on investment over 90 days.

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

Trip Group Limited  vs.  BANDAI NAMCO Holdings

Trip Group Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trip Group Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Trip Group reported solid returns over the last few months and may actually be approaching a breakup point.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANDAI NAMCO Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BANDAI NAMCO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trip Group and BANDAI NAMCO

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

The idea behind Trip Group Limited and BANDAI NAMCO 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.