Correlation Between Despegar Corp and Amadeus IT

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

By analyzing existing cross correlation between Despegar Corp and Amadeus IT Holding, you can compare the effects of market volatilities on Despegar Corp and Amadeus IT 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 Despegar Corp with a short position of Amadeus IT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Despegar Corp and Amadeus IT.

Diversification Opportunities for Despegar Corp and Amadeus IT

0.09

Correlation Coefficient

Despegar Corp  Amadeus IT

Significant diversification

The 3 months correlation between Despegar and Amadeus is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Despegar Corp and Amadeus IT Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amadeus IT Holding and Despegar Corp 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 Despegar Corp are associated (or correlated) with Amadeus IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amadeus IT Holding has no effect on the direction of Despegar Corp i.e., Despegar Corp and Amadeus IT go up and down completely randomly.

Pair Corralation between Despegar Corp and Amadeus IT

Given the investment horizon of 90 days Despegar Corp is expected to under-perform the Amadeus IT. But the stock apears to be less risky and, when comparing its historical volatility, Despegar Corp is 3.41 times less risky than Amadeus IT. The stock trades about -0.14 of its potential returns per unit of risk. The Amadeus IT Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,018  in Amadeus IT Holding on December 30, 2024 and sell it today you would earn a total of  711.00  from holding Amadeus IT Holding or generate 10.13% return on investment over 90 days.

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

Despegar Corp  vs.  Amadeus IT Holding

Despegar Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Despegar Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Despegar Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Amadeus IT Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amadeus IT Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Amadeus IT may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Despegar Corp and Amadeus IT

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

The idea behind Despegar Corp and Amadeus IT Holding 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.