Correlation Between Trip Group and Booking Holdings

Can any of the company-specific risk be diversified away by investing in both Trip Group 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 Trip Group and Booking Holdings 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 Booking Holdings, you can compare the effects of market volatilities on Trip Group 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 Trip Group with a short position of Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trip Group and Booking Holdings.

Diversification Opportunities for Trip Group and Booking Holdings

0.43

Correlation Coefficient

Trip Group  Booking Holdings

Very weak diversification

The 3 months correlation between Trip and Booking is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Trip Group Limited and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking 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 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 Trip Group i.e., Trip Group and Booking Holdings go up and down completely randomly.

Pair Corralation between Trip Group and Booking Holdings

Assuming the 90 days horizon Trip Group Limited is expected to generate 1.42 times more return on investment than Booking Holdings. However, Trip Group is 1.42 times more volatile than Booking Holdings. It trades about -0.03 of its potential returns per unit of risk. Booking Holdings is currently generating about -0.05 per unit of risk. If you would invest  6,568  in Trip Group Limited on December 29, 2024 and sell it today you would lose (588.00) from holding Trip Group Limited or give up 8.95% of portfolio value over 90 days.

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

Trip Group Limited  vs.  Booking Holdings

Trip Group Limited

Risk-Adjusted Performance

Very Weak

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

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 fragile performance, the Stock's technical and fundamental 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 Trip Group and Booking Holdings

The main advantage of trading using opposite Trip Group and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trip Group 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 Trip Group Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.